Climate risk

Climate risk means a risk resulting from climate change and affecting natural and human systems and regions.

In the course of increasing global temperature and extreme weather phenomena the Intergovernmental Panel on Climate Change (IPCC) has been founded by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) for a better understanding of climate change and meeting concerns of these observations. Its main aim is evaluating climate risks and exploring strategies for the prevention of these risks.

As per current projections of IPCC the following future effects have to be expected:

While affecting all economic sectors, the effect on single continents will differ. Beside these direct physical climate risks there are also indirect derived ones:

Direct risks of climate change are expected especially for branches, which strongly depend on natural resources like agriculture, fishing, forestry, health care, real estate and tourism. For example, storms and flooding damage buildings and infrastructure, whereas hot summers with less precipitation cause crop failure.

The governmental endeavours to reduce climate costs have direct effects on economy. For example, the targets regarding emissions within the shall be realised by implementing emissions trading. By this instrument the value of emissions can be quantified monetarily, approximating the value of avoiding hazardous substances. This value shall be internalized by companies and considered in investment decisions. By considering emission costs the prices for i.e. energy and transport can increase and therefore change consumer demand. The insecurity of legislation leads to indefinite adjournation of projects and investments.

Similar to the tobacco industry, industries producing excessive greenhouse gases are exposed to the risk of an increasing number of lawsuits, if damages can be traced back to emissions, i.e. for floodings, crop failure, etc.

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