5. Wall Street reckons with climate change
Some of the biggest names on Wall Street are partnering with climate science groups to produce the first countrywide, property-level maps attempting to financially navigate the age of extreme weather-driven calamity, Axios' Steve LeVine writes.
These maps are so granular that they can pick out individual commercial buildings and electric power stations, and thus advise investors about the potential impact to their specific assets through the end of the century.
- BlackRock and consulting firm Rhodium this month released a sophisticated program classifying the threat to investments in U.S. municipal bonds, electric utilities and commercial real estate.
- Wellington Management, CalPERS and Woods Hole Research Center have produced a similar system for the U.S., with the goal of expanding into a global analysis.
Their early conclusion: An all-but oblivious Wall Street is underpricing the risk of intense heat, wildfires, drought, storms and floods to their investments. "Even the scientifically rudimentary things are something the investment community hasn't thought about at all," said Philip Duffy, president of Woods Hole.
The big picture: If one views climate change as a prolonged period of chaos, it makes sense that investors would seek to protect their current holdings, be careful about what they bet on next — and look out for shrewd places to put their long-term money.
- Between 2060 and 2080, up to 26% of metros would likely have 100 days a year of 95 degree heat, up from 1% today, according to Rhodium and the Climate Impact Lab.
- Why it matters: Greater heat reduces the productivity of outdoor labor, increases mortality rates, pushes up spending on air conditioning, and lowers agricultural output.
- The investment: All that heat could seriously reduce the value of real estate in hot places, like Arizona and Texas, while triggering a rush of property interest in cooler locations like North Dakota, northern Minnesota, Maine and New Hampshire.
Biggest losers: The Gulf Coast, much of Arizona, the South Atlantic. Naples and Key West, Florida, could lose 15% or more of GDP a year, mostly from coastal storms, BlackRock says. Local tax bases could shrink if populations migrate away in the face of chronic storms.
Biggest winners: A net gain along the West Coast in Oregon and Washington state, Maine, and patches of the north-Midwest. Jamestown, North Dakota, could see its GDP rise by 5.2% a year by 2040, and 6.5% in 2060–2080, under a business-as-usual emissions scenario.
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