Responsible Investor

Watch out for the weather

What do researches say about the possible connection between climate change and natural catastrophes?

The passage of hurricanes Harvey and Irma across Texas, Florida and the Caribbean in September 2017 has returned the spotlight to the possible connection between huge cyclones and climate change.

Questions have been raised by the enormous material damage and almost 150 victims of these events, but also indirectly by the recent decision of the Trump administration, which has begun to backtrack on the Paris Climate Agreement of 2015 describing it as an expensive handicap for the American economy.

There are no clear-cut answers and the scientists themselves are advising caution. “We cannot say whether climate change had an impact on this event until we perform a scientific analysis on the conditions and circumstances,” explained Noah Diffenbaugh, professor at Stanford University.

The very same Diffenbaugh, however, coordinated a recent study to verify the relationship between extreme weather events and climate change. In so far as it draws conclusions, and the approach is very conservative, Diffenbaugh and his staff manifest a suspicion that polluting emissions have led to an increase in extreme weather events in over 80% of the world’s surface for which observations were available: these events include hurricanes caused by low pressure cyclones.

Researchers also focused on a series of regional events including the Californian drought between 2012-2017, the floods in southern India in 2013 and the melting of the arctic ice caps. In all three cases the research hypotheses were reinforced. Concerning the Arctic, an alarming picture emerged: in the last thirty years the increase in temperature has led to a 40% decline in sea ice during the summer season.

Other studies seem to confirm the idea that there is an overall connection between pollution, the global rise in temperatures and extreme weather events. A study carried out by thirty European universities led by the Vienna Polytechnic, examined the relationship between floods in Europe and global warming, using the analysis of data from over forty thousand weather stations in thirty eight countries over a fifty year period. Like the scientists of Stanford, also the coordinator of this research, Gunther Bloschl, claims that the approach should be conservative. Furthermore, the fundamental parameter must not be the intensity of the event. “If only the magnitude is measured, the role of climate change could be masked by other effects. Urbanization, intensive agriculture, deforestation and other effects can influence floods”, said the Austrian Academic, explaining that the key could be found both in the atmosphere and in the calendar. “In northeast Europe, in Switzerland, Finland and in the Baltic, the floods usually occur in March, a month earlier than when they occurred during the 1960s and 1970s. The cause is the premature melting of the snow, which is a result of higher temperatures”.

The trend appears to be contradicted by the fact that in the north of Great Britain and Germany, the northwest of Ireland and the coastal areas of Scandinavia, the floods were taking place later than in the past. However, this too can be linked to global warming because the later arrival of winter storms, the cause floods in these regions, appears to be connected to the alteration in pressure between the equator and the Pole.

For Harvey and Irma, the damage is being assessed and has been estimated at between 50 and 70 billion dollars, an eye-opening figure and one worthy of reflection. On one hand, in light of the devastation in Houston, the city worst hit, many have suggested a rethink concerning the way the development of large urban centres has taken place. Urbanization expert, Newsha Ajami, also from Stanford University, has claimed that “replacing trees and vegetation with buildings, streets and other infrastructure has an impact on infiltration, it increases the outflow of polluted water and encourages floods when extreme weather events occur. Constructing in areas at risk from flooding and using asphalt, concrete or other impermeable construction materials turns cities into bathtubs.”

On the other hand, thoughts turn to the scarce insurance cover. The huge resources necessary to deal with these catastrophic events require an ever greater intervention from the private insurance system, which will be called on to back up the state in this important function of safeguarding the collective.

The sector, therefore, has a role and a responsibility. The scope of this  response to global warming is not only limited to damage cover. The room for manoeuvre is wider and also includes sustainable development. Generali, for example, has developed a consultancy plan for businesses, based around three cornerstones: the first (divesting) involves withdrawing investment from companies that have a high carbon intensity in their production cycle. The second (engaging) relies on the establishment of dialogue with businesses that today emit CO2 in order to encourage the conversion to renewables. The third (investing) finances the companies that already use renewable energy.

In addition to insurance companies, governments should also be making commitments. In the eyes of many, the Chinese government, thanks to the current American disengagement, is destined to assume a global leadership role together with the European Union. China is the country that contributes the most emissions and consumes more coal than any other country, but it is also the country with the most to offer in the battle against global warming.

For Beijing, fighting climate change is an absolute political priority and numerous programmes have been launched, from cuts in emissions (for example concerning cars) to huge investment in alternative energy sources. The government has allocated 360 billion dollars: today in China three and a half million people are employed in the renewable energy sector. This figure is estimated to increase by a further 13 million by 2020. The road is still long, however, because more than half of electricity consumption in China is derived from traditional energy sources.