Fighting climate change: New risks call for new ways
January 21 2020 10:27 PM

The world’s just gone past its warmest decade on record.
According to findings released by Nasa and the National Oceanic and Atmospheric Administration, 2019 was the second-hottest year on record, trailing only 2016. 
Sure, no longer is climate change a debatable problematic; and across the financial world, central banks, policy makers and investors are waking up to the compelling reality.
Here are some alarming projections.
Some climate-economic models suggest up to a quarter of global GDP - currently around $80tn - could be lost if no action is taken to reduce carbon dioxide emissions. And low-income countries will risk losing larger shares of their economic output.
The number of extreme weather events has quadrupled over the last 40 years. Only 44% of the financial losses caused by those types of events are now covered in the US. In Asia it’s just 8% and in Africa only 3%.
Central banks can’t be expected to save the world from climate change, the Bank for International Settlement said on Monday, urging instead global co-ordination ranging from government policy to financial regulation.
The 2015 Paris Agreement on global warming among almost 200 countries brought together the developed and developing worlds to pledge limits on pollution that causes climate change. The voluntary and non-binding pledges seek to hold the rise in temperatures to below 2C (compared with preindustrial levels), and preferably to 1.5C, at the end of this century, to avoid the rising seas and superstorms that climate models predict.
But not enough has been done. 
Human activities are estimated to have already caused about 1C of warming and are increasing that at a rate of about 0.2C per decade. The UN World Meteorological Organisation reported last year that global temperatures were on track to rise 3-5C by the end of this century, well beyond the targeted cap of 2C. 
There are some silver linings, too.
In addition to the Paris accord, there’s also been a global grassroots movement that has taken the form of street protests, green finance, efforts to decarbonise industries such as agriculture and steel, a divestment push to pressure energy companies to adopt greener ways; and even a climate-conscious rise in veganism. 
The global Carbon Disclosure Project, or CDP, encourages companies, cities and states to disclose and manage their environmental impacts. The data is used by shareholders and other stakeholders to assess company progress.
In the world of investing, asset managers are increasingly incorporating environmental, social, and governance (ESG) metrics into investment decisions. 
More than 1,500 investment managers have signed up to the UN Principles for Responsible Investment and the ESG sector is now the fastest-growing part of the market.
The prevalent model of monitoring risks by assessing historical data and assumptions “largely irrelevant to future climate-related risks” need to change, according to BIS.
Assessing the risks, therefore, requires a reset in the regulatory approach, which has already begun in the financial community with the development of forward-looking, scenario-based risk-management methodologies.
Fighting climate change is a collective responsibility.

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