In the run up to the Paris Climate Change Conference, COP21 – Nov. 30 through Dec. 11 – some significant economic considerations are emerging.
A 2006 report compiled by Nicholas Stern dealt with the economics of climate change.
A rise of 4 degrees Celsius would put between 7 million and 300 million people at risk of coastal flooding, there would be a 30 percent to 50 percent reduction in water availability in southern Africa and the Mediterranean, and agricultural yields would decline by 15 percent and 35 percent, he said.
At the 2009 Copenhagen climate change conference, Stern stated that a 6-degree Celsius rise in global surface temperature was likely, and that governments should prepare for a 4-degree Celsius rise, which would lead to the loss of 85 percent of the Amazon rainforest.
Mark Carney, governor of the Bank of England, complimented Lloyds of London on being at the forefront of global insurance in late September of this year.
He noted that shifts in our climate bring potentially profound implications for insurers, financial stability and the economy.
Carney reiterated the growing international consensus that climate change is unequivocal, and that the last 30 years in the northern hemisphere have been the warmest since Anglo-Saxon times.
Indeed, eight of the 10 warmest years on record in the United Kingdom have occurred since 2002.
He stated that evidence is mounting of human beings’ role in climate change, commenting that while there is always room for scientific disagreement about climate change, insurers are among the most determined advocates for tackling it sooner rather than later.
“The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security,” Carney said. “But, once climate change becomes a defining issue for financial stability, it may already be too late.”
This paradox is deeper: As risks are a function of cumulative emissions, earlier action will mean less costly adjustment.
In 10 weeks, representatives of 196 countries will gather in Paris at the COP21 summit to consider the world’s response to climate change.
It is governments who must choose whether, and how, to pursue that 2-degree world.
Carney hosted a Federation of Small Businesses meeting in mid-September where the private and public sectors discussed the current and prospective financial stability risks from climate change and what might be done to mitigate them.
He notes that there are three broad channels through which climate change can affect financial stability:
1. Physical risks: the impacts today on insurance liabilities and the value of financial assets that arise from climate- and weather-related events, such as floods and storms that damage property or disrupt trade.
2. Liability risks: the impacts that could arise tomorrow if parties who have suffered loss or damage from the effects of climate change seek compensation from those they hold responsible.
3. Transition risks: the financial risks that could result from the process of adjustment toward a lower-carbon economy.
Carney said risks to financial stability would be minimized if the transition begins early and follows a predictable path, thereby helping the market anticipate the transition to a 2-degree world.
The combination of the weight of scientific evidence and the dynamics of the financial system suggest that, in the fullness of time, climate change will threaten financial resilience and longer-term prosperity.
The window of opportunity for action is finite and shrinking.
The pope published his hard-hitting encyclical earlier this year in which he makes observations that may make uncomfortable reading for some businesses and global multinational corporations based in the Western industrialized world.
He observed that world leaders were failing to hear the cry of the earth and the cry of the poor and urged developed countries to limit consumption and support sustainable development in the developing world.
Francis was deeply concerned that economic powers continue to justify the current global system where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effects on human dignity and the natural environment.
The pope, therefore, made a frank plea to world leaders to ignore the short-term outlook that has always dominated politics and look to the long-term instead.
In looking toward the Paris conference, he noted that previous world summits failed to live up to expectations because, due to a lack of political will, they were unable to reach truly meaningful and effective global agreements on the environment.
However, the pope holds out the positive challenge for the contribution that the real economy can make through diversification and improvements in production, which helps companies to function well, and enables small and medium businesses to develop and create employment.
This is part of Francis’ call for sustainable development rather than a maximization of profit with little regard for the environment and society, present and future.
Now the representatives of God and mammon combine in calling the world to address climate change.
While Christians see the divine ethical and moral imperative for addressing climate change, which is damaging creation and human well-being, we also have the incentive of mammon in the form of reducing insurance risks.
John Weaver is the chairman of the John Ray Initiative (JRI), an educational charity focused on connecting environment, science and Christianity in the United Kingdom. He was principal of South Wales Baptist College until his retirement in 2011 and served as the president of the Baptist Union of Great Britain in 2008-09. A longer version of this article first appeared on the JRI blog and is used with permission.
Vice president of the John Ray Initiative (JRI), an educational charity focused on connecting environment, science and Christianity in the United Kingdom. Weaver was principal of South Wales Baptist College until his retirement in 2011 and served as the president of the Baptist Union of Great Britain in 2008-09.