Climate Change Costs Could Top $8 Trillion by 2030: Report


It's not a good week for climate change naysayers. According to a report released this week, climate change will have significant structural impacts on the transportation, construction, and manufacturing industries over the next 20 years and could account for costs over $8 trillion by the year 2030. This comes quick on the heels of news that, as Fast Company reported yesterday, entire portions of coastal towns across the United States will be submerged in the coming decades.

The latest report, carried out by the consultancy group Mercer, along with the World Bank's International Finance Corporation, urges asset managers to take a long-term view on the impact of climate change on foundations, pension funds, and endowments, taking into consideration the relatively unstable landscape of climate change policy.

"Weather events like the recent floods in Australia will continue to impact infrastructure, food security and property, contributing to material portfolio risk for institutional investors," said CEO of the Investor Group on Climate Change in Australia, Nathan Fabian.

The authors of the report assert that climate change adds a 10% risk to some portfolio investments but that there is an opportunity arising out of the crisis—a $5 trillion dollar opportunity to be precise, and investors should consider investments in, say, renewable energy.

"Climate change brings fundamental implications for investment patterns, risks and rewards. Institutional investors should be factoring long-term considerations, such as climate change, into their strategic planning," said Andrew Kirton, Chief Investment Officer at Mercer.

The other opportunity that the global warming crisis introduces is for innovation in climate change policy. Without a coherent framework to move forward, it seems that risks will be that much higher—and that much more unpredictable.

The report considers different scenarios for the year 2030, depending on how well developed climate change policies around the world are at that point. If, for example, leaders buckle down on climate change and implement strict policies to help reduce the effects of global warming, then "the uncertainties are lower than for the other scenarios, as investors are able to predict the pathways of policies with a reasonable degree of confidence," says the report.

But as Fast Company previously reported, some measures to combat climate change—having to do with geoengineering—are deemed too drastic and cost-prohibitive. That means many policy changes are unlikely to reverse global warming's effects.

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[Image: John Proctor]

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  • Rodney North

    We in the coffee industry - but most of all the farmers themselves - are already seeing clear negative impacts from climate change. It is throwing off the delicate timing of rains and dry seasons. Heavy rains at the wrong time are knocking the flowers from the trees (which means no fruit, ie coffee, later one); and rising temps are making once-ideal crop land unsuitable for high-grade arabica coffee. As coffee is grown in the mountains going further up the mt (to capture the desired cooler temperatures) isn't a real option. Mountains have the annoying habit of getting smaller the higher up you go. So - not enough ground to go around, so to speak. Better brace yourselves for lower supplies and higher prices.

  • John Englander

    My comment above has an important typo in the last sentence. The projections indicate that sea level will rise for at least 500 years, not 50.

  • John Englander

    Good insight. We need to see the financial impact of changing weather due to climate change over the next several decades. This is the necessary balance to those who are preoccupied with the immediate financial cost of initiatives to change our energy system and other ways to reduce greenhouse gases.
    What needs to be distinguished is the overall climate / weather impacts, from sea level rise. Having spent the last two years in research on a forthcoming book about sea level rise, I am keenly aware that sea level needs to looked at as a specific issue. The incredibly long lead times for increased ocean heat to manifest as rising sea level takes hundreds of years. All the models show that sea level will rise for centuries, even if we stop the atmosphere from warming further. This means that even geo-engineering will not stop sea level from rising. We need to begin Intelligent Adaptation to this long term trend. And it should be noted that there is a natural cycle history to huge sea level change. It has gone up and done almost 400 feet (120 m) with each ice age, in a 100,000 year cycle. Twenty thousand years ago, SL was down almost 400 feet. It has been almost level for 6,000 years. Now it is rising and is project to rise for at least 50 years.