Woodwell Climate contributes hazard analysis to landmark McKinsey report on socioeconomic impacts of changing climate
We can’t stop climate change without leadership from the private sector, and this month saw a landmark example of that: the release of important new research on near- to medium-term (10-30 years) risks from climate change by the McKinsey Global Institute (MGI), the business and economics research arm of global management consulting firm McKinsey & Company. For its reports, MGI seeks the advice of academic advisors and industry experts to inform its research. Woodwell Climate Research Center (formerly Woods Hole Research Center) scientists joined a number of leading institutions and thought leaders in MGI’s working group on climate risk. We also produced much of the climate science analysis in the report.
The simple fact of the leading management consulting firm highlighting near-term physical climate risks (from extreme heat, drought, etc.) is major news, and the work shows how a stable climate is foundational to human prosperity. Illustrating the severity of 10- to 30-year risks is a powerful means to motivate action on adaptation and decarbonization.
An important difference between this work and previous efforts is that this work does not attempt to make a comprehensive estimate the effects of climate change on global GDP. (In my view there is no meaningful way to do that.) Rather, this analysis takes a bottom-up approach, focusing mainly on specific aspects of climate change in specific regions and exploring their socioeconomic ramifications more fully. For example, the study looks at extreme heat in India and its effects on labor productivity, national GDP, and human mortality. Another case study examines how threats to Florida real estate from sea level rise might affect property values, insurance premiums, state property tax revenues, and more.
These “knock-on effects” are precisely what make it impossible at present to estimate the total economic costs of climate change—the effects are simply too pervasive and interconnected.
Where do we go from here?
First, Woodwell Climate hopes to continue producing physical climate hazard analyses for MGI’s research on the socioeconomic consequences of climate change.
Second, our ongoing work with Wellington Management and the California Public Employees Retirement System (CalPERS) will grow with the announcement later this month of a major new partner.
Finally, we are seeking new opportunities to apply our risk assessment capabilities. A well-functioning insurance industry, for example, would be very helpful in managing climate risks, and Woodwell Climate can help to bring that about by providing granular assessments of risk that incorporate climate science. Cities and towns, including those here on Cape Cod, are on the front lines of climate change, yet lack the resources to cope. The same applies to national governments in the developing world. Our risk modeling capabilities can help.
Woodwell Climate’s risk assessment work is organized around the foundational objective of maximizing public benefit through transparency and easy access to information. In contrast to a growing industry of for-profit providers of risk information, we are choosing to forego opportunities to monetize access to our data, on the belief that wide availability of top-quality climate risk information is an important public good. Another element of our approach, which further distinguishes us from private-sector providers, is that our methods will be published in the peer-reviewed literature. This gives consumers of risk information confidence in the soundness of our work and distinguishes it from low-quality alternatives (which do exist in the market but can be difficult to recognize). Publication of our methods also allows others to build and improve upon them, which isn’t possible when methods are closely guarded trade secrets.
This approach of putting public good ahead of our own financial gain is, of course, exactly in line with Woodwell Climate’s long-standing mission and culture and is enthusiastically supported by our staff and board of directors. We’re depending on our donors to support it too, because this approach relies on philanthropic support to obtain societal benefit from our risk assessment capabilities. Initial indications are very encouraging, and we’re excited about the potential to do more.
Thanks as always for your interest and support.
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