Due to improvements in the ability to trace losses from extreme weather events back to emissions, climate-related litigation risks are increasing at many companies. How does loss attribution work, and what are the implications for investments?
Recent years have seen extreme weather events, including excessive heat, prolonged drought or intense rainfall and flooding. The consequences are significant, with damages exceeding hundreds of billions of U.S. dollars and many lives lost. The critical question is: Have these events been made more likely by climate change? If so, by how much? And how close are we to high-emitting companies being held liable due to their activities? The answer may be that this is closer than many might expect. Given progress on loss attribution, the risks of climate litigation are likely to increase, affecting company valuations. This will impact investors, lenders (including corporate bond holders) and insurers.
Rayer, Q. (2023). How Extreme Weather Caused by Global Warming Is Driving New Investment Risks. GARP (Global Association of Risk Professionals), 19 April 2023.