Could climate change affect your business?
According to the authors of an article in the United Kingdom, the misuse of climate models could pose a growing risk to financial markets. The report says that misuse of climate models can give investors a false sense of certainty about how the physical impacts of climate change will play out.
With heat waves, forest fires, massive storms and sea level rise set to intensify as the Earth warms, companies are under increasing pressure to disclose “how the disturbance could affect their activities “. But the authors of a peer-reviewed article in Nature Climate Change warned that the drive to incorporate global warming into financial decision-making had overtaken models used to simulate the climate by “at least a decade.”
Unintended consequences due to improper use of climate models
Misuse of climate models could lead to unintended consequences, such as the “green laundering” of some investments by minimizing risks, or harming the ability of companies to take on debt by overstating others, the authors said. The problem is that existing climate models have been developed to predict temperature changes over decades, on a global or continental scale, when investors typically need location-specific analysis over much longer time periods. short.
Climate models are also not designed to simulate extreme weather events, such as storms, which can lead to sudden financial losses. To bridge the gap, the authors called for the development of new forms of climate projection to support the financial sector, supported by trained âclimate translatorsâ to help regulators, investors and businesses make better use of science.
“Businesses like to use models because the numbers give them a sense of security,” said Tanya Fiedler, senior lecturer at the University of Sydney and lead author of the article. “That doesn’t necessarily mean the numbers are reliable.”
(With contributions from agencies)
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