Physical Climate Risk Disclosures: A Crucial Step in Preserving our Economic Stability

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The latest IPCC summary shows that we are falling short of curbing global warming to 1.5°C or even 2°C and that damages will accelerate as temperatures rise further. One estimate suggests that if temperatures rise to 4°C above pre-industrial levels over the next 80 years, global economic losses could mount to $23 trillion per year, causing permanent damage that would surpass the 2007-2008 financial crisis. While much of the world is focused on decarbonization — as it should be) — there is a significant looming and highly overlooked danger organizations face today, says Rich Sorkin of Jupiter Intelligence. And, he says, it’s one that can have significant effects on our global economy: physical climate risk.

There are two types of physical climate risk — acute, including unprecedented flooding or a rare and massive wildfire — and chronic, which is longer-term, such as sea level rise and changing precipitation. These acute and chronic physical climate risks manifest into extreme weather events like prolonged droughts and extreme heat waves, such as the one we experienced this summer, to more frequent and severe storms that cause widespread, devastating flooding.

As these events increase, companies across every sector are experiencing damages to their physical assets, resulting in disruptions…

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