Global Warming and Extreme Weather Investment Risks

Environmentally focused investors often consider climate risks; however, potential liabilities for damages from extreme weather events due to emissions from carbon-intensive sectors present risks that may not be reflected in current share prices. Given the devastation of the 2017 Atlantic hurricane season, it is worth asking: how close are we to some companies or sectors being held liable, at least partially, for their activities around emissions? The answer may be that this is closer than many expect. The evolving field of extreme weather event attribution serves as a good example of how new science can raise important thought-provoking questions regarding the appropriate actions of both investors and companies under a changing climate and answer them with increasing confidence.

In recent articles, Quintin Rayer and co-authors estimated that the top seven carbon-emitting publicly listed companies, under a hypothetical climate liability regime, might increasingly see around 1–2% losses on their market capitalisations (or share prices) from North Atlantic hurricane seasons. This Palgrave Macmillan book chapter gives a comprehensive exposition of how that estimate was arrived at, as well as clarifying how it was quantified. Related aspects from a physical point of view are provided, with an associated general overview of the current state of the related science of climate change, alongside a focus on extreme weather events.

Q G Rayer, P Pfleiderer, K Haustein (2020), Global Warming and Extreme Weather Investment Risks. In: Walker T., Gramlich D., Bitar M., Fardnia P. (eds) Ecological, Societal, and Technological Risks and the Financial Sector. Palgrave Studies in Sustainable Business In Association with Future Earth. Palgrave Macmillan, Cham., Print ISBN 978-3-030-38857-7, Online ISBN 978-3-030-38858-4. Ch 3, pps 39-68. DOI: 10.1007/978-3-030-38858-4_3. https://doi.org/10.1007/978-3-030-38858-4_3

Links: https://link.springer.com/chapter/10.1007%2F978-3-030-38858-4_3, https://doi.org/10.1007/978-3-030-38858-4_3


 

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Dr Quintin Rayer

About Dr Quintin Rayer

Quintin is a Chartered Fellow of the Chartered Institute for Securities and Investments, a Chartered Wealth Manager and holds a Physics degree from Imperial College London and a Physics doctorate in atmospheric physics from Oxford University and is a Fellow of the Institute of Physics.