The physical risks of climate change face developing and developed countries alike. However developing countries often lack the infrastructure and capacity to respond to physical risks like extreme weather events, or impose new standards of infrastructure.
With the estimated $520bn a year global cost in climate-related disasters, and $2.7tn cost of building infrastructure resilient to climate change, there is a clear incentive for businesses and governments in all countries to plan for impacts that cannot be mitigated.
Businesses with operations in developing countries could be proactive in planning for and managing physical risks brought about by weather events such as storms, floods and drought. Such risks could be considered holistically, as they pose threats not only to the business itself, but also to the broader supply chain, local ports and roads, and impacts on local employees and customers. Businesses operating in these jurisdictions likewise cannot assume local governments will have the capacity to implement necessary measures.
This highlights the role for insurance in such jurisdictions, as a means for businesses to manage and transfer risks associated with extreme weather events. Parametric cover, which is triggered after natural catastrophes, may assist in enabling a swift response when disaster strikes, minimising disruption on the business.
Until now, most of the focus of work on the climate crisis has been on “mitigation” – jargon for cutting greenhouse gas emissions, and not to be confused with mitigating the effects of the climate crisis. The question of adapting to its effects has taken a distant second place, in part because activists and scientists were concerned for years that people would gain a false complacency that we need not cut emissions as we could adapt to the effects instead... Mizutori said the time for such arguments had ran out. “We talk about a climate emergency and a climate crisis, but if we cannot confront this [issue of adapting to the effects] we will not survive,” she told the Guardian. “We need to look at the risks of not investing in resilience.”