Over at Grist this week, environmental risk assessor Dana Nuccitelli talks about the response to climate change as “humanity’s greatest-ever risk management failure“. Humans are generally quite risk-averse, she argues, and in no other area of our lives would we tolerate such a risk to our safety – for example, the average American man has a 42 per cent chance of contracting cancer in his lifetime, and yet if chemical contamination causes that risk to increase by even 0.001 per cent, we’ll shut the whole site down for years and not let people anywhere near it. In relative terms the added risk is quite small, and yet our response is swift and certain.
By way of contrast, consider Nuccitelli’s summary of the risks of widespread climate change:
These risks include more than half of global species potentially being at risk of extinction, extreme weather like heat waves becoming more commonplace, global food supplies put at risk by this more frequent extreme weather, glaciers and their associated water resources for millions of people disappearing, rising sea levels inundating coastlines, and so forth.This isn’t some slim 1-in-a-million risk; we’re looking at seriously damaging climate consequences in the most likely, business-as-usual scenario.
These risks are huge, and yet most people you speak to aren’t all that concerned about mitigating them – for many climate change seems far off, an issue for future generations to solve, and governments aren’t doing much to make that happen. Canadian environmental journalist Naomi Klien picks up this same thread in her 2010 TED talk, ‘Addicted to Risk‘: in what other area of our lives, she says, would we be asking, ‘When’s the last possible moment we can act to stop this catastrophe?’ Why are we allowing this to happen? Why are we passing off the responsibility for our own future instead of demanding better risk-management strategies now?
Nuccitelli think it’s because of a perception gap, a “lack of public comprehension of the magnitude of the risk we face”. This is partly because climate change is difficult to talk about; but also because most people have plenty of things to worry about day-to-day, and limited mental or emotional energy to devote to an issue that seems a) scientifically complex; b) politically fraught; c) potentially expensive; and d) way off in the distance. It’s easier to ignore it and think of other – more pressing – things.
But here’s the thing: when it comes to financial risk management, there really isn’t anything more pressing than solving climate change. Climate change is the highest risk, highest certainty event that will ever impact financial investment, and according to AODP chair John Hewson (who has a PhD in economics, so knows what he’s talking about) the potential financial consequences dwarf those of the GFC. People may not care much about solar t-shirts or hydro power, but they sure as hell care about their bank balances, and I think letting them know their financial future depends on managing the response to climate change might be a good way to get their attention.
Your pension or superannuation fund has a legal responsibility to manage risk on your behalf, and if you read this report by Baker & McKenzie you’ll see that includes managing the risks posed by climate change. There’s big money in risk management – these people are being paid a small fortune – but when it comes to the impact of climate change, they’re simply not doing their jobs. It’s a risk-management failure of colossal proportions, but luckily it’s one you can help us correct.
As Nuccitelli writes, “inaction is only justifiable if we’re certain that the bad outcome won’t happen”. In this case we’re almost certain it will, so we need you to keep pressuring your funds to do their jobs properly – to manage the financial risks of climate change on your behalf.