For a few years, matters involving climate change
have been nestled behind a darkening economy. Now,
though, the subject is re-emerging, hastened by
Hurricane Sandy and who will pay for the associated
liabilities.
Uncommon weather events are occurring with
increasing frequency and are causing an enormous
human toll and economic hardship. The marketplace
has become the first-responders here, sidestepping a
congressional stalemate. As such, insurers are
pricing climate change risks into their policies
while businesses are taking either mandatory or
voluntary steps to cut their emissions. The result
is now the platform from which to tackle the
challenges posed by the earth's warming.
Addressing the phenomenon is similar to how
Americans eventually coped with the domestic tobacco
industry, says
Randy Evans, co-author of a book called “Climate
Change and Insurance.” That is, for decades
cigarette makers warded off litigation and warning
labels, which eventually gave way to a U.S. surgeon
general report that pronounced smoking “a” cause of
cancer. The courts then relaxed the causation
standard, enabling some successful lawsuits to
change how that sector now does business.
Evans, a Republican who served as outside counsel to
the U.S. Speakers of the House during the 104th
through 109th Congresses, says that he does not
believe that the global environment is at a “tipping
point.” But he does say that it is at a “median
point” whereby all political and business leaders
must manage the apparent risks. An obvious sticking
point is whether man-made emissions from
fossil-fired power plants are adding to the level of
heat-trapping emissions.
“Man-made emissions are ‘one’ cause,” says Evans,
also a lawyer with
McKenna Long & Aldridge in Washington, DC and
Georgia. “Maybe it is a significant cause but it
does not have to be ‘the’ cause -- if you follow the
tobacco analogy. If it only has to be ‘a’ cause,
there should be some accountability: Why shouldn’t
those who profit the most share their profits with
those who suffer the most?”
Evans, who spoke to this reporter by telephone, says
that the trend toward collective action is similar
to a “beehive” whereby a swarm of activity exists
that it is generally headed one way. Independently,
a steady and unyielding movement is pushing for
action on climate change. And it’s coming from
shareholders, insurers and ordinary citizens, he
says.
Major Movers
Unlike the prolonged tobacco fights, Evans says that
the battle to reduce global warming emissions will
be shorter. With the ubiquitous nature of the
internet and cable that allow for the immediate flow
of information, the time frame will get compressed
down to “a decade.”
The clock has been ticking. Shareholder activism,
for example, is forcing companies to adopt more
environmentally-friendly policies: Evans notes that
those demands have increased four-fold over the last
four years. To boot: The U.S. Securities and
Exchange Commission says that corporate boards are
obliged to report climate risks so that they can be
fully evaluated by investors.
According to a report by
Ceres, which is a group of investors interested
in sustainability, 96 of the combined 173 companies
in the Fortune 100 and Global 100 have set immediate
greenhouse gas reduction targets. Only a third of
them, however, have longer-range plans.
Insurers, meantime, are now pricing those risks into
their policies. Evans says that Munich Re and Swiss
Re are among the major providers that actuarially
measure climate hazards. Consider: In 2011, 14 major
weather events occurred costing at least $1 billion
each, says the
National Oceanic Atmospheric Administration.
Sandy alone is expected to run $20 billion.
Droughts, earthquakes, floods, tornadoes,
thunderstorms and wildfires are active and having
widespread effects.
“Whether stakeholders succeed in achieving mega-tort
recoveries remains to be seen, but in any case,
insurers risk spending substantial sums on their
legal defense and should seriously consider
mitigating climate change exposure,” says Walter
Stahel, head of risk management research for the
Geneva Association.
Dealing with global warming will be expensive. But
the proposition posited by author Evans is that the
price tag will be more affordable if it is paid up
front.
To that end, insurers are a major mover. So are
those shareholders interested in sustainability. But
they are following the gyrations in weather patterns
as well as the scientific community's cues, which
have also enabled EPA greenhouse gas regulations --
laws that have been upheld by the federal courts. As
a result, the various moving parts are aligning and
trying to dull the impact of climate change.
EnergyBiz Insider has been awarded the Gold for
Original Web Commentary presented by the American
Society of Business Press Editors. The column is
also the Winner of the 2011 Online Column category
awarded by Media Industry News, MIN. Ken Silverstein
has been honored as one of MIN’s Most Intriguing
People in Media.
Twitter: @Ken_Silverstein
energybizinsider@energycentral.com
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