Analysis Paralysis: Financial Sector Dithering With Climate Data Rather Than Starting To Act
The financial world is making the same mistakes regarding climate change as it did with the housing market in the lead-up to the 2008 global financial crisis, a new report warns. Degrees of Risk co-authored by Ian Dunlop, a former head of the Australian Coal Association found that while regulators and the financial sector had begun to grapple with the risks posed by the climate crisis, they were not moving fast enough. Instead, they were relying on modelling scenarios of 3C and 4C of global heating without properly factoring in how catastrophic they would be.
Dunlop said the sector needed to be acting to keep warming as close to 1.5C as possible, in line with scientific warnings, if it was to survive and prosper into the future. The report, published by a group called the National Centre for Climate Restoration (Breakthrough), said the financial sectors approach to the climate crisis was similar to the GFC when catastrophic housing debt led to a crash. In both cases, it relied on overly optimistic financial models that led it to assume it could avoid disaster.
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Dunlop said in the wake of the Intergovernmental Panel on Climate Change (IPCC) report published last week, a focus on collecting more data over action could be dangerous. He said scenario analysis or stress testing was helpful in some cases, but many institutions were concluding they may survive a worst-case scenario. Youve got to have the business world facing up to the fact that its survival now depends on serious action to get emissions down, Dunlop said.
The report painted a stark picture of what is expected under the worst-case scenarios. As a general rule of thumb, global average warming of 4C (covering land and ocean) is consistent with 6C over land, and 8C in the average warming over mid-latitude land. That risks 10C in the summer average, or perhaps 12C in heatwaves, the report said. It noted western Sydney had already reached 48C in summer. If you add 12C to the 48C you get summer heatwaves of 60C, the report said. Bank customers would be dead on the streets. These are the most extreme scenarios imagined where societies and economies break down under pressure from profound changes in climate.
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https://www.theguardian.com/environment/2021/aug/17/paralysis-by-analysis-financial-sector-focused-on-climate-data-instead-of-action-report-says