Lots of people have talked about how we as a species tend to treat really big – but slow – change with lethargy. Basically, we’ll spot the lion that leaps out at us and act quickly, but if the lion is silently tracking us for several days we may be none the wiser. Or the classic analogy – the frog that doesn’t know well enough to jump out of the slowly heating pot of water.
I don’t know if that’s actually true about frogs, but a recent “The Economist” article pointed out that there is an analogous situation going on with businesses and climate change.
Their point is simple. Yes, many businesses are talking the talk about clean energy, but are they watching and truly measuring all the risks that face them? Are they really accounting for more frequent natural disruptions of their supply chains and overall businesses?
For example last year the Rhine, the world’s busiest waterway, forced commercial traffic off the river when droughts failed to keep all the shipping afloat. Or, for a “closer to home” example consider what the NY Times wrote in regard to the recent “bomb cyclone” and the Missouri River. That event resulted not only in massive flooding, but it forced a choice between allowing the water to possibly destroy dams and potentially unleash a 45 foot wall of water or to proactively open up dam floodgates that would also dramatically increase the flooding, resulting damage, and additional potential loss of life.
In short, the assertion is that all this negative value or risk isn’t being factored into company value calculations, our financial markets, or even our potential economic growth rate. Perhaps only a few companies, such as PG&E post the California fires (bankrupt), have really been priced appropriately. (And that, we might add, more than a little bit late.)
Check out The Economist article Climate Change and The Threat To Companies or the NT Times The Fight to Tame a Swelling River With Dams That May Be Outmatched by Climate Change. They’re worthwhile reads.