Climate Change

The climate is changing faster than anyone thought. Not only is the earth warming, causing more intense storms and making Arctic ice vanish, but the political and policy landscape is changing even more dramatically. Already, certain industries are facing mandatory limits on emissions of carbon dioxide and other greenhouse gases in some of the 129 countries that have signed the Kyoto Protocol. This month representatives of those nations are gathering in Montreal to develop post-Kyoto plans. Meanwhile, U.S. cities and states are rushing to impose their own regulations.

This change isn't being driven by sudden boardroom change to environmentalism. It's all about business calculations. One new twist in the whole discussion of global warming is the arrival of financiers. Bankers, insurers, and institutional investors began to tally the trillions in financial risks that climate change poses. They are now demanding that companies that are stakeholders add up risks related to climate change and adjust their business plans accordingly.

Adding to the pressure on CEOs, the public has largely accepted global warming as reality. The economic logic can be convincing. Far from breaking the bank, cutting greenhouse emissions and energy use can create new business opportunities, while, at the same time, greening up a company’s reputation. One company that has hiked its visibility on this changed landscape is GE. It formed a new Ecomagination division to offer everything from more efficient trains to low-emitting coal power plants.

Insurance companies in particular are staggered by their mounting bills for fires, floods, hurricanes, heat waves, disease, hailstorms, and crop loss. Many scientists agree that higher temperatures are causing stronger storms and perhaps worsening extreme weather events, ranging from wild fires and droughts to ice storms.

Even tiny weather changes bring awesome costs. A slight increase in intense storm activity could boost yearly wind related...