Let’s talk about climate change.
The wildfires, hurricanes, and floods we’ve seen in 2020 (on top of an already-awful global pandemic) make this an important conversation to have.
We all know what “weather” is. It’s what we feel outside, day to day. Climate is defined as the “usual weather” of a place. So “climate change” is when places get more rain or higher temperatures than it would typically get. Sometimes the changes take hundreds or millions of years – but it happens, nonetheless.
Think climate change isn’t an issue? Well, the market consensus is moving in the other direction. Insurers, government entities, and large investors are treating climate change as a major systemic risk to financial markets.
Why? Because many companies and sectors are at risk from the costly heatwaves, wildfires, droughts, floods, and hurricanes that come with a warming planet.
People who are studying the earth, for example, say the earth’s temperature has increased by 1 degree in the past 100 years. While that doesn’t seem like much, these small changes have drastic effects. For example, we are seeing snow and ice melt, oceans rise, and some areas getting hotter than usual (and some are getting colder).
As for financial impact, take a look at what the “costs” of climate change have been over time:
So, what does climate change mean for investors?
Investors worry that climate risk could cause the prospects of certain companies to drop dramatically and ricochet throughout the financial system (much like what happened during the 2008 financial crisis).
But, unlike a global issue such as the coronavirus, the effects will play out differently around the country and the world.
Flood- or wildfire-prone areas could experience disruptions in business or find it difficult to insure homes and structures against damage. Agriculture could be damaged by droughts and heat stress. Already-warm areas could become too hot for comfortable habitation.
But, if the world goes all-in on sustainability too suddenly, there’s also a danger that the “transition risk” caused by new regulations or widespread shifts in energy use could also hurt markets or certain sectors of the economy.
Well, what’s the good news?
There’s always hope. Many of the worst effects of climate change will play out over years and decades, not weeks and months.
There’s time for people, businesses, and governments to adapt. And humans are infinitely adaptable. And there’s hope that the worst-case scenarios about a hotter world might not come to pass.
I’m optimistic that we will make the changes needed to get on the right path and steer away from the worst effects of climate change.
Deep breath. We can do this.
What do you think – are you worried about climate change? What do you think we should do about it? Share your thoughts with me!
We can always donate money, but there are several free things you can do. You can participate on a local level, with organizations that support it. As a consumer, you can consume less energy or products with plastic packaging. You may even consider eating less meat (or going vegan!)
I’ll wrap by providing 5 charitable organizations who would certainly appreciate a few dollars. Feel free to check them out!
What it does: The Coalition for Rainforest Nations is unique in that it’s an intergovernmental organization of over 50 rainforest nations around the world, from Ecuador to Bangladesh to Fiji.
What it does: The Clean Air Task Force is a US-based non-governmental organization that has been working to reduce air pollution since its founding in 1996.
What it does: This program looks into smart clean energy research and development and the effectiveness of increasing spending in that space, then advises policymakers on the best course of action.
What it does: Rainforest Foundation US works to protect the rainforests of Central and South America by partnering directly with folks on the front lines: indigenous people in Brazil, Peru, Panama, and Guyana, who are deeply motivated to protect their lands.
What it does: The Climate Emergency Fund is different from the groups listed above. It was founded recently — July 2019 — with the goal of quickly getting money to groups engaged in climate protest.