Those interested in risk management are starting to take climate change a bit more seriously.
The evidence is anecdotal, but for proof one can just ask Phil Renaud, executive director for the Risk Institute at Ohio State University, a risk management research organization.
Researchers at the institute recently took a deep dive into enterprise risk management strategies in the face of weather and climate risk and how businesses can build resilience.
The institute advises organizations around the country on how to mitigate risks. Members of the institute include carriers Nationwide, State Auto, Ohio Mutual and FM Global. Broker members include Aon, Gallagher Bassett and Oswald Cos., a big regional broker in Cleveland. Numerous firms from other industry sectors, such as law firms, food makers and sellers, and credit card companies, are members as well.
The institute holds regular seminars on various topics related to risk management and how to address and manage emerging risks.
The latest series of seminars focused on weather and climate risk and building business and property resilience. Organizers say they were overwhelmed by the number of those in attendance.
“When we held our cyber session last year, it was our best attended provisional development session,” Renaud said. “When we hosted our weather and climate events sessions, they were our second best attended events.”
He noted that the institute has direct access to climate data from the Byrd Polar and Climate Research Center, known internationally as a leader in polar, alpine and climate research, and has integrated those findings into its seminars.
“As we read in the newspaper, every single day there’s another weather event, and they’re getting closer together, and the severity of those weather events is growing in intensity,” Renaud said.
He referenced as an example the 1,000-year storm last month in Ellicott City, Md., the second time in two years a massive rainstorm devastated the city with flash flooding, wreaking havoc on city infrastructure, toppling cars, and inundating buildings and businesses with water.
“That’s a different animal,” he said. “That’s very different than what we’ve experienced.”
Renaud said the institute has made it a goal to try to help its members and others in the business community prepare for more devastating storms, the likes of which few are currently prepared for.
The institute is encouraging developers to make better choices on where to build and for new and existing buildings to be made more resilient. They also are looking at the risk dangers to global supply chains posed by climate change.
“Businesses need to understand where the gaps are in their vendor relationships,” he said.
Union of Concerned Scientists
The accelerating sea level is putting 311,000 U.S. coastal homes worth roughly $117.5 billion at risk from chronic flooding over the next 30 years, a new report by the Union of Concerned Scientists shows.
The report, released earlier this week, also indicates that some 14,000 coastal commercial properties assessed at a value of roughly $18.5 billion are at risk during that time frame.
Expect things to get worse as time passes.
By the end of the century, more than $1 trillion could be at risk. That’s 2.4 million homes ($912 billion) and 107,000 commercial properties ($152 billion).
The analysis uses property data from Zillow, and it offers three rising sea level scenarios developed by the National Oceanic and Atmospheric Administration.
The report examines how many residential and commercial properties along the coastline in the lower 48 states are at risk of becoming “chronically inundated” from high tides and flooding in the coming decades—even in the absence of major storms.
“What’s striking as we look along our coasts is that the significant risks of sea-level rise to properties identified in our study often aren’t reflected in current home values in coastal real estate markets,” Rachel Cleetus, a report co-author, said in a statement. “Unfortunately, in the years ahead many coastal communities will face declining property values as risk perceptions catch up with reality. In contrast with previous housing market crashes, values of properties chronically inundated due to sea-level rise are unlikely to recover and will only continue to go further underwater—literally and figuratively.”
The report shows that chronic flooding in some communities could translate into eroding property values and unlivable houses, which would eventually lead to falling tax revenues. Small rural communities could feel it the worst, experiencing a loss of between 30 percent and 70 percent of their property tax revenue, the report states.
It’s probably no surprise that Florida leads the U.S. with the most homes at risk. Climate Central, a nonprofit news organization that analyzes and reports on climate science, last year ranked the state for having the most cities at risk for flooding. And last year, data analytics firm GridLex issued a report on flooding that shows Florida was the top U.S. state with Census tracts next to the ocean, with 547 tracts and 1.9 million people living in 1.2 million homes.
The Union of Concerned Scientists report shows Florida has roughly one million homes and $351 billion in decreased property values at risk of chronic flooding by century’s end, followed by New Jersey (250,000 homes) and New York (143,000 homes).
Nearly 175 U.S. coastal communities may expect to see 10 percent or more homes at risk of chronic flooding by 2045, the report shows.
Places that could be hit hardest include communities in Louisiana, Maryland, New Jersey and North Carolina, according to the report.
Failure to manage natural resources puts businesses at critical risk, according to a new report from Allianz.
In its report, “Measuring and Managing Environmental Exposure: A Business Sector Analysis of Natural Capital Risk,” Allianz analyzed more than 2,500 companies and found that the oil and gas, mining, food and beverage, and transportation sectors have the highest natural capital risk exposure.
The report states that a failure to manage natural capital can bring new interruption and liability scenarios that wipe out profits as resource scarcity, regulatory action, and pressure from communities and society all grow.
“Companies around the world are increasingly confronted with the negative implications of natural capital depletion,” Chris Bonnet, the manager for environmental, social and governance business services for Allianz Global Corporate & Specialty, said in a statement. “Sustainable use of natural resources is critical for the future success of most businesses. Yet while corporate awareness of their natural capital footprint is growing, many still need to gain a better understanding of the specific threats that can impact their industry sector and company in particular, as well as the mitigation options available.”
The report looked at the natural capital risk exposure in 12 industries based on five factors: biodiversity, greenhouse gas and non-GHG emissions, water and waste. The oil and gas, mining, food and beverage as well as the transportation sectors ranked highest in risk exposure—all are in the “danger zone” of natural capital risks.
Companies in the oil and gas and mining sectors have a high level of natural capital risk exposure due to the nature of their industry. Transportation falls into the “danger zone” due to its biodiversity impact and GHG and non-GHG emissions. Transportation-related carbon emissions have increased by 250 percent since 1970 and now account for 23 percent of all global emissions, according to the report. The food and beverage sector is listed as being in the “danger zone” because of its reliance on natural capital in its supply chains.
Seven industry sectors rank in the “middle zone,” meaning risk and mitigation levels are roughly in balance: construction, utilities, clothing/apparel, chemical, manufacturing, pharmaceutical and automotive. Telecommunications is the only sector to be classified in the “safe haven” zone, meaning it is without have a high level of risk exposure.
According to the report, natural capital risks evolve through three phases before impacting the bottom line of a business:
- First Phase: Awareness of the risk grows.
- Second Phase: Natural capital risk will potentially start affecting individual companies in their supply chains or own operations through regulatory change or social pressure.
- Third Phase: Once the risk cannot be mitigated, it materializes, leading to damages such as liability costs, higher production expenses or business interruption, ultimately affecting the financial performance of the organization.
“The key question is how risks can be mitigated as early as possible—both on a technical operational level and in regard to overall enterprise risk management,” Bonnet said. “Local water scarcity, for example, can be addressed by rainwater harvesting in day-to-day management or, on a more strategic level, by deciding not to expand an existing plant due to risk of water shortages.”
Colorado’s governor has ordered his state to adopt California’s vehicle pollution rules.
Gov. John Hickenlooper this week signed an executive order to direct the Colorado Air Quality Control Commission to draft rules to adopt the same standards as California by the end of the year.
Also adopting California’s stringent vehicle emissions standards: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington, D.C.
Colorado’s order comes a few months after federal regulators said they weren’t going to implement stricter new emissions rules, which would have started with the 2022 model year, that were adopted by the Obama administration.
The Obama administration rules stated that each automaker’s fleet must get roughly 36 miles per gallon on average by 2025.
California has a waiver under the federal Clean Air Act allowing it to impose tougher standards than the federal rules. Other states can’t set their own standards but can elect to adopt California’s rules.
The Alliance of Auto Manufacturers, which didn’t like the rules, tweeted that “this could impose many burdens on the state’s drivers & taxpayers.”
Hickenlooper cited climate change as a reason for the move, and he noted that Colorado’s elevation makes pollution worse.
“Our communities, farms and wilderness areas are susceptible to air pollution and a changing climate,” his order said. “It’s critical for Coloradans’ health and Colorado’s future that we meet these challenges head-on.”
*This article was originally published by our sister publication Insurance Journal