Environmentally focused investors often consider climate risks. However, potential liabilities for extreme weather event damages caused by carbon-intensive sector emissions present risks that may not be reflected by financial markets.
How close are we are to some companies or sectors being held liable, at least partially, for their activities? Perhaps closer than many expect.
Recent studies have explored potential consequences for the top seven carbon-emitting publicly listed companies. Under a climate liability regime, these firms might increasingly see financial losses from North Atlantic hurricane seasons of around 1-2% of their market capitalisations (or share prices). Evidence of enhanced major hurricane risk in response to human-induced global warming is strengthening. Additionally, projected changes are more significant, with greater possible share price impacts for high-emitting firms.
Q G Rayer and K Haustein (2020), Time to settle up? Originally Published in The Actuary August 2020, ©The Institute and Faculty of Actuaries, www.theactuary.com, 5th August 2020, p34-35.