Sport Scientists warn over misuse of climate models in financial markets
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By Matthew Green
LONDON (Reuters) - Misuse of climate models could pose a growing risk to financial markets by giving investors a false sense of certainty over how the physical impacts of climate change will play out, according to the authors of a paper published on Monday.
With heatwaves, wildfires, massive storms and sea-level rises projected to intensify as the planet warms, companies are under growing pressure to disclose how the disruption could affect their businesses.
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But the authors of a peer-reviewed article http://dx.doi.org/10.1038/s41558-020-00984-6 in Nature Climate Change warned that the drive to integrate global warming into financial decision-making had leap-frogged the models used to simulate the climate by "at least a decade".
"In the same way that a Formula One Grand Prix car is not what you would use to pop to the supermarket, climate models were never developed to provide finessed information for financial risk," said Andy Pitman, a climate scientist at the University of New South Wales and a co-author of the paper.
Improper use of climate models could lead to unintended consequences, such as "greenwashing" some investments by downplaying risks, or hitting the ability of companies to raise debt by exaggerating others, the authors said.
US stocks are set to rise for third day in a row after Reddit bets tumble, while oil hit a one-year high as economic outlook brightens
US futures rose on Wednesday, pointing to another good day for stock markets. Oil prices rose to a one-year high after data showed supplies fell last week. Analysts said the fall in GameStop and other 'meme' stocks had calmed nerves. Sign up here for our daily newsletter, 10 Things Before the Opening Bell . US stocks were set to rise for the third consecutive day on Wednesday, according to futures prices, as markets looked past the recent retail-trading disruption towards an economic recovery in the middle of the year. S&P 500 futures rose 0.3%, although Dow Jones futures were only 0.04% higher.
The problem is that existing climate models have been developed to predict temperature changes over many decades, at global or continental scales, whereas investors generally need location-specific analysis on much shorter timeframes.
Neither are climate models designed to simulate extreme weather events, such as storms, which can cause sudden financial losses.
To bridge the gap, the authors called for the development of new forms of climate projection to support the financial sector, backed by "climate translators" qualified to help regulators, investors and companies make better use of the science.
"Businesses like using models, because the numbers give them a sense of security," said Tanya Fiedler, a lecturer at the University of Sydney and lead author of the paper. "It doesn't necessarily mean the numbers are reliable."
(Reporting by Matthew Green; Editing by Hugh Lawson)
US stock futures flatline near record-highs, as investors warily watch Treasury yields march higher .
US futures flatlined on Wednesday, as Treasury yields stayed at one-year highs. Bond yields have jumped as investors expect stronger growth and inflation. Bitcoin rose to a new high of above $US51,700 while oil prices remained elevated. Sign up here for our daily newsletter, 10 Things Before the Opening Bell . A jump in US bond yields raised questions about the bull market in stocks on Wednesday, with the 10-year Treasury yield holding at around a one-year high and equity futures flatlining. Meanwhile, the US benchmark WTI oil price stayed above $US60, as freezing weather continued to batter Texas.