The million dollar bill climate: damage to infrastructure, food and insurance more expensive, and less hours worked

regarding the climate change, there are a handful of uncertainties -will it be enough to push the younger generation against this emergency to a global increase

The million dollar bill climate: damage to infrastructure, food and insurance more expensive, and less hours worked

regarding the climate change, there are a handful of uncertainties -will it be enough to push the younger generation against this emergency to a global increase of awareness? do arrive on time the increase of the social awareness? to what extent is the evolution of technology an ally in the battle?- and one certainty: every minute that passes without taking drastic measures is a missed opportunity. Last week we knew that 2019 was the second warmest year in a global scale from which there are records -a very short distance from 2016 - and the warmest in Europe. And this Thursday, McKinsey -one of the largest consulting business in the world that works with large corporations - calls to companies, banks and insurance companies to incorporate climate risk in their decision-making, and puts black-on-white the dangers of economic involved in this phenomenon caused by the hand of man: disruptions in the food systems that desembocarán in higher prices; damage to property, infrastructure and supply chains; fewer hours worked outdoors in the heat and less availability of insurance, with premiums more expensive.

After more than 10,000 years of “relative stability”, the climatic conditions are changing: in less than a century and a half the global temperature has increased by something more than a degree, with significant variations between geographies; the pace of global warming is the highest in 65 million years; the average sea level has risen and the recurrence of phenomena such as hurricanes or heat waves has not stopped growing. Events that “could put at risk hundreds of millions of lives, trillions of dollars of economic activity and the physical capital and the natural world.”

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“We were surprised by the magnitude and timings of these physical risks and their potential impact on human life, the nature, the economy and the financial system”, recognizes Dickon Pinner, head of the practice of sustainability at McKinsey and one of those responsible for the text, which examines six potential impact on the livability, the work, the food system, physical assets, infrastructure, and natural capital - and it is impacts in at least one of these areas in all and each one of the 105 countries surveyed. The cost of adaptation, in addition, it grows with the passage of time: if you take measures by 2030, the block in the process of development would have to spend between 140,000 and 300,000 million; if he does so two decades later, this figure would increase to a range between 280.000 and 500,000 million, according to the United Nations.

On the plane food, the consulting firm, warning of the damage that the warming of the oceans leads rigged for the fishing industry, where the decline in catches will put into question the half-life of between 650 and 800 million people in the absence of a greater decarbonisation. The risk is even greater in the poorest nations, where the dependence on natural capital is more high, and the knock on crops such as rice, wheat, corn and soybeans is particularly high. The reduced crops, the report's authors, these foods are at risk to become more expensive: “The historical experience”, added, “suggests that prices will grow at least a 100% short-term if the production falls 15%, which would hit particularly the poorest communities [the highest percentage of income devoted to food]”. On the other hand, the countries locked in cold regions -such as Canada, Russia and some nations of northern Europe - could take out cut thanks to the greater yield of the crops and to the increase of tourism that will flee the heat.

Something similar happens with the labour factor: less developed countries tend to suffer more waves of extreme heat, a factor that can raise to 20% the hours missed. McKinsey concludes that these countries, the lowest share of responsibility they have over 2.5 billion tons of carbon dioxide released into the atmosphere since the Industrial Revolution, are “in a situation of increased risk.” Hence, climate change is considered one of the main factors increased inequality in the future. In the area of insurance, the professional services firm with headquarters in New York appeals to a radical change in the current model of the sector, “insufficient to understand the risk resulting from climate change”, and believes that the levels of capitalization of the insurers and the premiums they charge to customers will have to increase. “Without these changes, some of the assets in certain regions will be increasingly difficult to secure.”

To illustrate the current and future risks of global warming, McKinsey takes a look at a handful of episodes that are directly linked with the warming in the last two decades. Two heat waves (the 2003 European and 2013-2014 in Australia) caused, respectively, losses of 15,000 million dollars ($13.450 million euros) and a loss of productivity of around 6,000 million dollars. Hurricanes Sandy and Harvey led to damage valued at 187.000 million. The fire of Fort McMurray, in Canada, left in 2016 a bill of 10,000 million dollars. And the powerful flooding of 2017 in China, other 3.500 million. “As cyber risk, have been integrated in the decision making of corporate and public sector, climate change and the risks that result from it must also be presented as an important factor in the decision making”, concludes Jonathan Woetzel, director of McKinsey Global Institute. A notice to mariners in every rule to the business world.

Updated Date: 18 January 2020, 01:00

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