Technology The US has a chance fix its broken climate risk disclosure system
Five things Biden should do to tackle the climate emergency
Biden has a model for mobilizing a unified national response: His own COVID-19 strategy. First, develop a national strategy for victory. Biden's COVID-19 plan presents a comprehensive national strategy for ending the pandemic. While many have despaired of defeating climate change, the truth is we can do it. It certainly won't be easy, but broadly speaking, we know what we need to do: Restore the climate conditions that supported the rise of human civilization. That means returning greenhouse gas concentrations and global temperatures to pre-industrial levels as quickly as possible.
Government and investors are quickly moving to quantify the risks posed by climate change and make that part of their financial decision-making. But many companies remain unsure how to measure the threat of climate change to their business, and whether or how to report those risks to investors and the public.
Financial regulators in the US arewith that question now. The Securities and Exchange Commission (SEC) opened a 90-day public comment period in March that will inform the first update to federal climate risk disclosure guidelines in a decade. Shareholder groups and asset managers like BlackRock (CEO Larry Fink in February that “climate risk is investment risk”) are pressuring boardrooms to improve corporate transparency around climate risks. Without better disclosure, corporate managers to avoid plowing capital into assets and supply chains that could collapse after natural disasters and dump massive costs on insurers, investors, customers, and the global economy.
Climate change is a threat to our nation's financial health
Climate change is a threat to our financial system. It's encouraging to see steps are being taken in a financially sound direction.In two significant actions just last week, the Commodity Futures Trading Commission (CFTC) announced it will establish a new Climate Risk Unit, and the Securities and Exchange Commission (SEC) requested public input about how it should require climate change consideration under its existing responsibility to mandate risk disclosure from publicly traded companies.
Right out of the gate, some climate scientists are raising a major red flag.that the computer models used to forecast physical climate risk—where, when, and how severely impacts like drought and sea level rise are most likely to appear—aren’t very good. Scientists contend they fail to accurately answer crucial questions for investors such as which supplies chains will face shortages or which coastal warehouses are most prone to flooding.
But scientists and federal regulators now have a chance to make better tools available to more companies. In the meantime, more companies should be able to start with information they already have—or lose credibility with investors and face legal repercussions.
Food system emissions need attention at Biden's climate summit
The food system requires significant amounts of energy to operate, with attendant carbon dioxide emissions. From gasoline in tractors to natural gas for food processing plants, from electricity for storage and refrigeration to even the act of cooking, the global food system is responsible for roughly 30 percent of total energy demand. But the food system also emits other important greenhouse gases, such as methane from cattle and sheep and nitrous oxide from fertilizer use, two potent greenhouse gases.
Why it’s so hard to measure a company’s climate risk
Companies face two kinds of climate change risk. Transitional risk—how a company’s business model could be disrupted by the global shift away from fossil fuels—can be analyzed through carbon footprint accounting, said Lihuan Zhou, a finance researcher at the World Resources Institute (WRI). The more emissions a company emits, the greater risk it faces from economic opposition to fossil fuels (oil companies and airlines, for example, are at high transitional risk).
Physical risk is much harder to pin down. Assessing the climate risk to facilities or supply chains requires complex modeling of the interaction of geophysical forces such as temperature and ocean currents for decades into the future. Predicting likely weather phenomena in a location is even harder. In a Feb.in the journal Nature Climate Change, Australian climate scientists concluded that while the gold-standard computer models developed to evaluate scientific theories about the climate may reliably predict long-term global trends, the hyper-local predictions needed for a rigorous assessment of financial risk are beyond their reach. The difference of just a degree or two of latitude, or a few inches of sea-level rise, for example, may put a company’s warehouse in, or out, of harm’s way.
Overnight Energy: Treasury creates hub to fight climate change through finance | Sanders, Ocasio-Cortez introduce 'Green New Deal for Public Housing' |
MONDAY AGAIN! Welcome to Overnight Energy, your source for the day's energy and environment news.Please send tips and comments to Rachel Frazin at firstname.lastname@example.org . Follow her on Twitter: @RachelFrazin . Reach Zack Budryk at email@example.com or follow him on Twitter: @BudrykZack . Signup for our newsletter and others HERE. Today we're looking at a tentative climate commitment between Washington and Beijing, new action on climate change by the Treasury Department, and a bill from two congressional progressives to retrofit U.S. public housing.
The tricky business of measuring climate risk
Nevertheless, a number of private consulting firms will, for a few, produce custom physical climate risk evaluations for a company or government agency. These firms use proprietary models whose underlying data and internal assumptions are not always clear to prospective end users or subject to independent scientific scrutiny.
Their forecasts, says Upmanu Lall, a senior scientist at Columbia University’s International Research Institute for Climate and Society, should be taken with a big grain of salt. “Most climate scientists in academia will put a lot of caveats on every projection on climate change,” Lall said. “But by the time [a projection] gets to these companies, all the caveats get thrown away.”
Nonprofits like theand the have also laid out voluntary risk disclosure guidelines that companies can follow to measure and disclose risk on their own. But a Feb. by Zhou and his colleagues at WRI found numerous discrepancies between these guidelines, including which hazards are addressed (sea level rise, usually; extreme precipitation, sometimes; hail, never) and how they suggest companies measure them. That’s a problem, Zhou said, because “especially if we want companies to disclose this information to investors, it needs to be comparable.”
Fact check: Scientific consensus says humans are dominant cause of climate change
A Facebook user claims man-made climate change is a hoax. That is false.“The science is undeniable,” Biden said during the April 22 summit. “The cost of inaction keeps mounting.
Rich Sorkin, CEO of the risk assessment firm Jupiter, said in an email that the company stands by its models, which were developed in consultation with independent academic experts, and is “committed to accessible, transparent, useful, relevant, and credible information to all our partners and customers.” But he agrees that standards for climate risk disclosure are still lacking: “The metrics of quality, the form that is relevant, actionable and easy to use, and the pathway to affordability are all emergent and evolving in the early days.”
Make the scientific literature accessible to companies
The path to better climate risk disclosure, Zhou said, starts with turning scientific jargon into language the corporate sector understands. A good model is the Intergovernmental Panel on Climate Change (IPCC), a United Nations-supported group of leading global climate scientists. Every few years, it produces a major summary of the latest research. IPCC reports are the most authoritative source on projected climate impacts, and they always contain a summary of their findings designed for policymakers—but not one for the private sector, leaving companies to parse through hundreds of pages of dense scientific text and data on their own. The IPCC and other research groups should do more to make the business-relevant parts of that data available through free public resources like WRI’s, he said.
The Latest: Tracker credits Biden summit on emissions gap
WASHINGTON (AP) — The Latest on President Joe Biden's global climate summit (all times local): 9:10 a.m. An analysis shows President Joe Biden’s climate summit and the run-up to it cut the so-called emissions gap, a crucial measurement used to see if the world can limit global warming, by about one-eighth. Climate Action Tracker is a group of scientists who monitor nations’ pledges of carbon pollution cuts. It calculated that targets announced since last September cut about 12% to 14% from the emissions gap. © Provided by Associated Press FILE - In this Tuesday, Feb.
“The academic literature is there, but not in formats that companies are comfortable with or can access easily,” he said.
That task will be easier if the SEC provides more clarity about which, and how much, data a company needs to disclose on its risks, said Madison Condon, a professor of environmental law at Boston University who co-authored a Feb.on the SEC’s climate oversight. The SEC could also give better guidance to companies in different sectors about which information—how much water a specific mine uses, for example—they can keep proprietary.
“What’s material in one industry may not be material in another,” Condon said. “The regulators have not figured out how to get investors the data they really need.”
The SEC should also set uniform standards for risk modeling, selecting the best parts of the existing voluntary guidelines, and ensure that they are kept up to date with the latest science, Zhou said. And the agency can step up its enforcement of whatever rules it settles on; since 2010, when it first issued guidelines for climate risk disclosure, its crackdown on shoddy reporting has amounted to just 58 finger-wagging “comment letters” to companies, according to Condon’s. “They should press harder on companies ignoring obvious risks,” she said, possibly pursuing fraud charges for the worst offenders.
Acting now to head off corporate climate risk
Companies needn’t wait for the SEC to finish its guidelines. Even without precise long-term modeling, Condon said, many sectors like construction, manufacturing, and food and agriculture can identify physical assets at risk from worsening climate conditions. Managers have more incentive to tackle short-term risks than those decades away, she said. “You can do so much just with recent historical weather data to exposure latent risk to corporate supply chains,” she said. “Companies don’t need to hire a climate modeler to do that. Many aren’t prepared for risks that they can reasonably forecast using the back of an envelope.”
Emilie Mazzacurati, global head of climate solutions at the analytics firm Moody’s and a founder of Four Twenty Seven, a risk modeling agency acquired by Moody’s last year, said the agency is upfront with clients about the limits of global climate model forecasts, and uses historical data on storms, elevation, and hydrology to fill in local gaps. As modeling firms proliferate in the coming years, she said, they need to be transparent with the scientific community about their methodology.
“Cutting-edge advancements in representing future climate conditions should undergo a rigorous public peer-review process,” she said. “Further academic review and third-party audits of existing climate service provider methodologies would help strengthen the credibility of the climate services industry.”
Companies that do opt to work with modeling firms should ask questions about the model’s assumptions and data sources, and be prepared for forecasts that are framed as probabilities rather than certainties. Companies will also need to get comfortable being more transparent about their assets. The most important thing, Condon said, is for more companies to take climate risk seriously, and study it with whatever tools are available.
“The biggest concern is that we are unprepared,” she said, “and not thinking about climate risk at all.”
'The future of this planet is at stake,' new report pressures Facebook, YouTube and Twitter to battle climate lies .
Facebook, YouTube, Twitter and TikTok battled COVID, QAnon and election lies. Now climate has emerged as the new hotspot in the war on misinformation.Social media researchers and climate scientists say hundreds of thousands of posts denying climate change can be found on Twitter, Facebook and its app Instagram, Tik Tok and YouTube. And, a new report from Advance Democracy shared exclusively with USA TODAY found that warning labels or links to credible information are frequently missing from posts that deny the existence of climate change, dispute its causes or underplay its effects.