"Serious disconnects"
"Financial institutions often did not understand the models they were using to predict the #EconomicCost of #ClimateChange and were #underestimating the risks of temperature rises, research led by a professional body of actuaries shows."
https://www.ft.com/content/a5027391-41a4-4e21-a72d-f8189d6a7b71
The tools for assessing #econonic and #financial #ClimateRisk urgently need to be developed.
Since #ClimateAction needs an upfront cost, we need a well-informed assessment of that cost against the possible cost of doing nothing. If the cost of doing nothing is severely underestimated, that leads to inaction (and then the costs will bite when it's too late to do much about them).
Yay for #ClimateActuaries!
https://www.ft.com/content/a5027391-41a4-4e21-a72d-f8189d6a7b71
The paper "demonstrates how current techniques exclude many of the most severe impacts we can expect from #ClimateChange, such as #TippingPoints and second order impacts – they simply do not exist in the models meaning the models understate the level of #risk.
Our objective in writing this paper is to help accelerate the progress of more realistic #scenario modelling, which we in turn hope will help to further accelerate the progress on #decarbonisation we need."
https://actuaries.org.uk/news-and-media-releases/news-articles/2023/july/04-july-23-emperor-s-new-climate-scenarios-a-warning-for-financial-services/
Key findings:
– Many climate-scenario models in financial services are significantly underestimating climate risk
– Carbon budgets may be smaller than anticipated and risks may develop more quickly
– Model development is required to better capture risk drivers, uncertainties and impacts
Sounds like we've been driving in dense wildfire smoke so far. Climate models urgently need to start including non-linear effects.
"It’s only 15 years since S&P, Moody’s, and Fitch famously misjudged the #SubprimeMortgage market that triggered the 2008 financial meltdown. Now, they’re under fire for underestimating potential #climate losses in a rating system more tuned to the near term.
As for the $3.8 trillion #US #MunicipalDebt market: “no US municipal issuer’s credit rating has been changed because of #ClimateChange risk.”"
#ClimateRisk
https://www.bloomberg.com/news/articles/2023-08-01/ratings-firms-struggle-to-quantify-climate-risks-in-bond-market
"In contrast to much of the economics literature, we found that #ClimateChange could have material effects on economies and #CreditRatings as early as 2030. "
This is for entire countries. Lower credit ratings mean higher interest rates, paid by taxpayers.
https://theconversation.com/climate-change-is-making-debt-more-expensive-new-study-211009
As an aside: this paper has no data for many African countries: their credit ratings are already low today, climate change will add to the #redlining.
CelloMom On Cars
