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Davis Cherry

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Interconnected Risks Threaten Coffee Industry

Interconnected Risks Threaten Coffee Industry 624 351 Davis Cherry

Internal conflict is causing business disruption throughout the coffee industry. In South Sudan, which has recently experienced an uptick in violence, Nestle has suspended coffee imports. And, where supply chains have not been interrupted, security threats greatly increase the cost of doing business—coffee from war-torn Yemen costs $173 a pound.

Compounding threats to the coffee supply chain are shifting weather and climate patterns. Up to 50 percent of current coffee growing regions could become unsuitable for this crop this century. Company’s from Starbucks to Peet’s Coffee are already alarmed about this prospect and trying to actively manage this risk.

And, climatic and weather conditions are not just directly impacting coffee growing conditions, but, contributing to conflict in places like South Sudan, where water scarcity has exacerbated existing societal tensions. In a viscous cycle, conflict, insecurity and bad governance, lead to mismanagement of environmental resources.

In this age of ever-emerging risks and heightened global competition, companies must better understand a variety of risks that can have discreet impacts on their business as well as how interconnected threats can compound risk. Leading companies will also be able to proactively anticipate risks instead of responding to them as they happen. Adapt Ready allows organizations across industries to gain this holistic, proactive, view of risk like never before. Get in contact to learn more.

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September Risk Report

September Risk Report 300 168 Davis Cherry

Drought Exacerbates Tensions in Tunisia – A persistent drought is threatening agriculture, leading to protests over water and enhancing existing social tensions in Tunisia.

Companies Taking Water Risk Seriously – Forbes Magazine surveys private sector concerns about water scarcity and business strategies to reduce risk.

Global Climate Risk Threshold Passed – scientists say global CO2 levels surpassed 400 (parts per million) ppm in September. To keep global temperatures from rising 2°C, the Intergovernmental Panel on Climate Change (IPCC) estimates that CO2 ppm levels should stay below 450 ppm.

China Suffers Large Losses from Typhoon – Insured losses on mainland China from September’s Typhoon Meranti are expected to fall between $650 million and $1.15 billion. The intensity and frequency of typhoons that make landfall across the East Asia region have been increasing.

Climate Implications for Risk Assessment and Insurance – Companies can now expect to see higher flood premiums, larger flood deductibles and stricter underwriting standards as new scientific evidence suggests climate has made flooding events from Louisiana to Paris more severe.

BlackRock Advances Climate Risk Assessment – Managing trillios in assets, BlackRock said all investors should factor climate risks into their decision-making and “doing so would not mean having to accept lower returns.”

Climate a Significant Security Risk Says Military – Military and national security experts recommend the federal government to create a cabinet-level official to manage climate and security issues.

Rising Seas Threaten Islands in South Pacific – Island nation of Kiribati, in the South Pacific, might be the first country to be entirely eliminated due to sea level rise in 30 to 50 years.

Mars Chocolate Hires Meteorologists to Forecast Risks – Worried about how extreme weather is impacting its supply chain, Mars has hired meteorologists to better understand climate risks, from disruptive storms to changing growing conditions, for its chocolate supply.

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New York City Brings Global Awareness to Climate Threats While Facing Its Own Critical Challenges

New York City Brings Global Awareness to Climate Threats While Facing Its Own Critical Challenges 660 371 Davis Cherry

New York City just hosted Climate Week NYC 2016 to coincide with the United Nations General Assembly September 19 – 25. City governments, business leaders, NGOs and government representatives convened to discuss issues from sustainable land use in agriculture to strategies to reduce urban vulnerability. As records continue to be set for global temperatures and extreme events, organizers and participants directed significant attention to the need to better understand risks arising from global change and take action to save lives and protect assets.

While annually shining a light on this global crisis, New York City faces its own daunting perils. Sea level rise poses an almost existential threat to the city—a few weeks before Climate Week, New York Magazine released “This is New York in the not-so-distant future,” one of the most thorough pieces on the challenges threatening the city this century. As today’s hundred-year floods may become five times more likely in the next few decades, significant destruction of coastal properties, infrastructure and business activity will become an every-decade or once-in-a-generation occurrence. And, the re insurer Swiss Re has already predicted that its “anticipated annual losses in New York will more than double by 2050, to $4.4 billion, and the cost of black-swan events that happen on average around once every 70 years will more than quadruple, to $90 billion.”

This has significant implications for real-estate, business investment and the future economic growth of the city.

For all cities, not just New York, careful cost-benefit-analyses must now be made factoring in climate risks, particularly for long-term investments. Will a 50-year lifespan project be investment-worthy if it will be rendered unusable from flooding in 40 years or should developers ignore climate risks if it can make a return in a shorter term, say 10-20 years? Or, should a project or building design be altered and enhanced to withstand change? For individuals and businesses, they must decide if buying a property along the coast or flood-prone area will be responsible and safe decisions.

Beyond the very long-term, understanding how risks are changing, even if small, in the next few years can help decision-makers better prepare for disruption and catastrophes with the resources and assets already in place.

Adapt Ready’s analytics give better perspective to these tough decisions by providing risk information over multiple time frames, useful for short- and long-term decision making for a variety of stakeholders. While New York’s fate is of major significance to the world, other cities and communities face similar or worse risks. In the spirit of Climate Week, it is important to shine a spotlight on many other cities’ risks—with our global coverage, Adapt Ready technology can enhance decision-makers’ ability to manage risk at any location.

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August Risk Report

August Risk Report 1000 600 Davis Cherry

July Was The Hottest Month Ever Recorded – while recent El Niño effects have contributed to recent warming, NOAA scientists say this affect was over in June and that we are still on track for 2016 to be the warmest year on record.

Alaskan Village Decides to Relocate as Seas Rise – as the town of Shishmaref, Alaska has lost up to 3,000 feet of land to coastal erosion in the last 35 years, its residents have voted to relocate the town to a new site.

Exxon Mobile Halts Production as Louisiana Floods Threaten Facilities – the area around Exxon’s Baton Rouge 502,500 barrel per day refinery, received 22 inches of rain, 19 above normal for this time in August, forcing it to shut down four production units.

Extreme Weather and Labor Prices Lead to Price Surge for Cashews – extreme heat and low precipitation in Africa and Asia coupled with rising labor costs in India have led to lower production and prices have increased 20% since the beginning of the year, affecting retailers and food processors around the world.

Zika Virus Damages Puerto Rican Economy – new figures show that tourism in Puerto Rico earlier this year fell due to worries about the Zika virus. 42,000 room nights were lost between March and May 2016.

FEMA Seeks to Move Construction Away from Flood Zones – a FEMA proposal would require federally funded projects to be built 2 feet about the 1-percent-chance annual flood level while for projects like hospitals and nursing homes, FEMA could use tougher standards or apply the best available climate science to determine potential future flood conditions over the lifetime of the project.

NIH Warns Texas, Louisiana Could be Next in Zika’s U.S. Spread – and rising temperatures that lengthen mosquito seasons may contribute to this.

Plastics Industry in Turkey is Worried About Impact of Unrest on Exports – Turkish plastics processors are worried they will lose business as global manufacturers grow nervous about their sourcing in Turkey in the wake of the failed military coup that killed 300 people.

World Bank Report Details Growing Water Scarcity – among its many warning, water scarcity, exacerbated by climate change, could cost some regions up to 6% of their GDP.

US Administration Proposes Requiring Companies to Disclose Climate Risks – the administration recently proposed requiring that all companies doing business with the federal government publicly disclose what they know about their climate-risk exposure. This information will be a factor in taxpayer-funded contracting decisions.

Earthquake in Central Italy Levels Towns – 240 people have died with many more injured after a 6.2 magnitude earthquake. Many of the buildings in the towns hit hardest were made of unreinforced brick or concrete frames, making them vulnerable to earthquakes.

Climate Change may halve the world’s regions suitable for growing coffee –  a new report claims that without significant efforts to reduce rising global temperatures, half of the global area suitable for coffee production could become unsuitable for growing coffee by 2050.

Climate Change is Likely to Cause Allergy Misery for Millions – research from the UK points to a doubling of allergies to ragweed across Europe by 2050. The authors simulated how ragweed is likely to expand across the continent as temperatures rise.

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Cybersecurity and Climate: Two Emerging Risks Needing Equal Attention

Cybersecurity and Climate: Two Emerging Risks Needing Equal Attention 770 512 Davis Cherry

In May 2016, Cybersecurity Ventures released its Cybersecurity 500 list, a “global compilation of leading companies who provide cybersecurity solutions and services.” Already at approximately $400M per year, cybersecurity is calculated to cost for the global economy could reach $3 trillion by 2020. Meanwhile, extreme weather and climate events may already be costing the global economy $1.2 trillion per year—so who is at the top of the “Climatesecurity 500”?

Well, we couldn’t find such a large list, or even a list.

With such comparable magnitudes of costs, one would expect a similar number of firms and innovators in this space. One might argue that big consulting firms like PwC and KPMG are occupying the climate risk space, but, they also have large cybersecurity offerings which don’t seem to crowd out hundreds of other cyber solutions and services.

Cyber and climate risks share similar features, such as global reach, potential to shut down operations for extended periods of time and ability to impact critical infrastructure, such as electricity grids.

One explanation could be that cyber attacks can include the extraction of customer data and direct attacks of financial assets that can lead to significant reputational damage and lasting distrust of corporations by their customers. It is also easier to put a face on cyber crime—whether it is a government, individual or hive of hackers—and know what their motives are—primarily to steal financial data, but also acquisition of company and state secrets, espionage, retribution or simply “bragging rights.”

Climate risks are much more random, faceless and often considered “acts of God.” Companies may also be under a false sense of security thinking that they are already managing climate risks by tracking historical flooding, storm, temperature, fire, etc… data—we have seen, time and time again, that the past is a poor predictor of the future. Further, the presentation of climate data—in long-term projections and at regional spacial scales—can make addressing these risks seem very far removed as a C2ES survey finds that companies are lacking ” ‘actionable science’ that helps them understand locally-specific risks or risk scenarios.”

Comparison and analysis of the maturation of these two markets warrants greater analysis and there could be a variety of other reasons for this differentiation. But, the stakes are so high, its important to find out how risk information can better disseminate across companies and communities.

To help move the industry forward, Adapt Ready is focused on helping customers and the world better understand the real risks they face, take action and avoid losses. Hopefully we will soon see a list of company’s helping the world adapt to one of the other biggest security threats of our time.

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More Than a Metric: Multiple Data Points Must be Considered to Understand Climate Risks

More Than a Metric: Multiple Data Points Must be Considered to Understand Climate Risks 860 460 Davis Cherry

If each incremental increase in global temperatures matched precisely to an equivalent increase in climate and extreme weather risks, planning for the future would be much easier. However, the earth’s climate system is non-linear, most famously exemplified by MIT meteorologist Edward Lorenz in the “butterfly effect“—this phenomenon inspired Adapt Ready’s logo by the way.

A recent article in nature, Make climate-change assessments more relevant, explores the dynamic and multi-faceted aspects of translating climate data into information relevant to decision-makers. At the most sophisticated level, quantitative climatic data can be contextualized not only into local geographic and ecosystem conditions, but also with cultural responses to change and communities’ adaptive capacity. The authors call for greater academic research on these interactions.

The article also describes the non-linearity of sea-level rise and other impacts with global temperature increases—small island states will suffer proportionately more devastating impacts compared to large nations even with the same level of sea-level rise. Also, warming may steadily increase while no strong effects are observed from polar ice melt … until a certain threshold is met, which could unleash rapid and devastating change.

Measuring these risks are difficult enough if we knew exactly the trajectory of global temperature increase over the coming decades. Unfortunately, we must add another layer of complexity—uncertainty of future global greenhouse gas emissions. Affordability of clean technologies and government policy responses are some of the variables the article notes can influence future emissions, and, in turn, climate and extreme weather impacts.

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It may seem like putting significant effort into understanding future risks with so many variables that increase uncertainty is an overly-burdensome task, however, as major investment management firm BlackRock argues:

It is tempting to think the risks are hypothetical and that, if they were to erupt, could not have been foreseen anyway. This leads to complacency. Global insurers and reinsurers learned their lesson the hard way – the insurance sector was nearly wiped out (with 11 bankruptcies) after Hurricane Andrew in 1992, the costliest natural disaster before another US storm, Hurricane Katrina.

But with better preparation, the industry was left relatively “unscathed” after a record year of claims in 2011.

Sticking heads in the sand is not an option for countries, organizations and companies that want to be prepared and profitable in the coming years. And science, technology and policies are moving forward every day that advance our collective understanding of future risks. This is why Adapt Ready provides insights from multiple sources of climate risk data, updated and dynamically incorporated so that customers can assess their risks holistically and make the best decisions possible.

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First Half of 2016 Reveals Industry Climate Risks and Accelerating Global Threats

First Half of 2016 Reveals Industry Climate Risks and Accelerating Global Threats 900 500 Davis Cherry

While we increasingly hear about record-setting temperatures or unusual weather patterns and extreme events, evidence of concrete, climate-related, business losses is also mounting.

This May the energy industry in Canada experienced significant cut backs due to unprecedented wildfires in Alberta. Specifically, the fires led to a reduction of tar sands production by about one-third, or 800,000 barrels per day, according to data released by the U.S. Energy Information Administration.

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Tar sands is clearly one of the least environmentally beneficial sources of energy production. However, this highlights a growing risk for the entire energy industry’s infrastructure, pipelines and transmission systems.

Meanwhile, weather and climate extreme events continue to “shatter records” as The Guardian reports that “May was the 13th month in a row to break temperature records.” This is one of seven 2016 climate records The Guardian has compiled for this year, others include:

  • The Arctic had its warmest winter on record in 2015-16
  • India recorded its hottest day ever
  • Alaska had the warmest spring ever
  • The size of the increase in atmospheric CO2 concentrations is expected to set a record for largest year-on-year increase
  • Australia record its hottest fall ever
  • Massive coral bleaching occurred in the Great Barrier Reef

Add to this a recent statement by climate scientist Michael Mann that we can expect scorching heat in the U.S. Southwest to become the new normal and the need for both mitigation and adaptation has never been clearer.

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Not Even the Mona Lisa is Safe from Climate Risks

Not Even the Mona Lisa is Safe from Climate Risks 150 150 Davis Cherry

The Mona Lisa will reportedly “stay dry” as historic floods sweep Paris. But the fact that the world-famous Louvre museum has closed its doors to the public and scrambled to protect its vulnerable artwork, shows that no industry or part of society is immune from extreme weather and climate risks.

The Seine river in Paris has risen 16 feet as of June 2 and is expected to peak June 3. At least 10 people have died as thunderstorms and heavy rain swept across western Europe, hitting Germany and France the hardest. Thousands have been evacuated in both countries, streets in Paris have been closed and power shut down in many regions.

While likely not to exceed the Paris flood of 1910, when the Seine rose 26 feet,  much more infrastructure, business and settlements are situated in vulnerable areas. The economic costs will be hard to calculate, but will certainly be comparable to the billions in losses incurred by communities in Northern England last year.

Based on future rainfall projections, a recent study estimated that by 2050, annual average flood losses across Europe will amount to about $26MM a year; up from current averages of $5.5MM.

Evidence of climate risks across society and industry, from food and beverage and consumer goods companies to investors and insurers, is mounting every day. It’s time to prepare for change and adapt with intelligence.

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More Evidence That Companies See Climate Risks As Material

More Evidence That Companies See Climate Risks As Material 849 565 Davis Cherry

Most Congressional briefings or hearings in the last decade on climate have focused on corporate or government efforts to reduce carbon emissions. Last week, major companies not only called for action on curb greenhouse gas emissions, but detailed how they are already beginning to feel the effects of climate-related impacts.

Kellogg, one of the companies represented in Washington, DC during this recent Capitol Hill briefing with national lawmakers, recently suffered financial losses from droughts in Egypt. Its Chief Sustainability Officer, Diane Holdo, stated that:

Climate change can impact both food security and our business by posing risks to the long-term health and viability of the ingredients we use in our foods.

Ben & Jerry’s, Clif Bar, Kellogg Company, Mars Incorporated, PepsiCo, Stonyfield and Unilever all shared their experiences of how climate risks are disrupting their supply chains and global agriculture production.

The sustainability organization Ceres organized the event and a representative, Anne Kelly, speaking of the briefing, stated that:

The food companies got very specific about the crops they need that are now threatened, from vanilla to sugar to rice to corn. Extreme weather events are now threatening their availability. These companies are seeing on-the-ground changes in their supply chains that affect the predictability of their businesses.

Climate risks are not just academic or think tank issues we need to worry about in the future. They are having tangible economic impacts now, and companies need more information about not just risks to their current supply chains, but where they will need to source new materials and goods in the future.

Through software, key partnerships and a keen understanding of emerging business risks, Adapt Ready is working to provide the best intelligence for companies that want to stay ahead of these emerging risks, reduce losses and gain competitive advantage.

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International Financial Stability Board Strengthening Climate Risk Disclosure

International Financial Stability Board Strengthening Climate Risk Disclosure 400 300 Davis Cherry

Climate risk disclosure continues to gain steam throughout the international financial community. The Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures (TCFD) will release a final report by the end of the year that will provide guidance and seek to standardize climate risk reporting for investors. The TCFD is considering the interests of large institutional investors, such as pension funds, as well as insurers and asset managers so that the climate information needs of all parts of the “credit and investment chain” are considered.

This is in response to the scattered corporate reporting of climate risks, from carbon reduction to adaptation measures. There is increasing demand for climate risk information, however, currently, most investors are unable to seriously consider such risks in their portfolios due to a lack of consistent and comparable information. This conundrum was highlighted in a 2015 report by Mercer.

Led by Michael Bloomberg, TCFD will look at “near-, medium- , and long-term” risks from corporate emissions as well as physical impacts of weather and climate extremes. Notably, the task force seeks to correct the status quo of a “limited number of reporting regimes focusing on the financial risks posed by climate-related impacts.”

The task force has opened a public consultation to help it form its recommendations. Consultation ends May 1, 2016.

The FSB coordinates national financial authorities and international standard-setting bodies to work toward developing regulatory, supervisory and other financial sector policies in order to strengthen financial systems and increase the stability of international financial markets.

Adapt Ready is very excited to see initiatives like this unfold. Simultaneously, our climate risk intelligence software will enable companies to identify and disclose risks in line with TCFD and other investor and stakeholder expectations.

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Investors Ramping Up Research and Interest in Corporate Climate Risks

Investors Ramping Up Research and Interest in Corporate Climate Risks 830 551 Davis Cherry

While 2015 was a record-breaking year for climate and extreme weather events, 2015 and the beginning of 2016 also showed a clear uptick in concern from the market about the material risks of climate change.

This February, Larry Fink, the CEO of Blackrock, stated that companies should increase consideration of long term risks, particularly climate risks, into their business planning. Blackrock is the world’s largest investor with $4.6 trillion in assets under management.

In January, The World Economic Forum, for the first time, listed “failure to mitigate and adapt to changing climate” as its top global risk in its annual Global Risk Report. As a reviewer of the adaptation section of the 2013 risk report, I’ve watched this risk gradually rise to the top of concerns of many business and governmental leaders.

Adapt Ready expects the stringency and enforcement of climate risk disclosure, reporting and process management requirements to be more fully realized in the next few years (e.g., ISO will release ISO standards related to adaptation in 2017). However, the foundations of how investors, in particular, are increasingly grappling with this issue were on display from a multitude of sources.

Responding to the physical impacts of changing climate is no longer an “if” question but “how,” according to investment consulting company Cambridge Associates. Moody’s and Standard & Poor’s are intensifying climate risk research and already consider climate risks in their credit ratings.

The Economist Intelligence Unit released The cost of inaction: recognising the value at risk last year. The report highlights the direct and indirect climate impacts that the asset management industry must address due to this “probably irreversible problem beset by substantial uncertainty.” They take a meta view of global financial losses, considering different discount rate and temperature scenarios into account. They note:

If investment managers are aware of the extent of climate risk to the long-term value of the portfolios they manage, then it could be argued that to ignore it is a breach of their fiduciary duty.

Although in a macroeconomic sense, The Economist (possibly coining) uses the phrase Climate Value at Risk or ClimateVaR — the size of the loss a portfolio may experience, within a given time horizon, at a particular probability. They estimate a global ClimateVaR to be in present values US$4.2 Trillion from the perspective of a private investor. This is just as applicable from a corporate perspective and a key concept Adapt Ready uses in its technology.

Mercer’s Investing in a Time of Climate Change lays out a risk factor framework “TRIP” (Technology, Resource availability, Impact of physical damages and Policy) that is affected by different climate scenarios (e.g. rapid decarbonization corresponding with limited warming of 2°C versus significant climate change of 4°C or more). It assess the degree to which different asset and equity classes are sensitive to climate scenarios — agriculture and utilities have the most potential risk.

Screen Shot 2016-01-30 at 8.40.50 AMMercer even looks into bond ratings risk for different countries, noting Japan and New Zealand as higher-risk outliers for sovereign bonds in the developed-market. A key recommendation is better investor understanding of portfolio risks by industry sector, including company-level data.

This last point is a harbinger of what will almost certainly be a fast-moving, and perhaps sudden, ESG investment requirement —  providing company-level information on the physical risks from climate change and extreme weather.

Adapt Ready is dedicated to becoming the leader in providing companies with this climate information, not just to provide to investors, but, so that customers can gain competitive advantage, reduce risk and innovate.

Keep up with our Adapt Now Blog to learn how we are providing a full-service technological solution to address this rapidly emerging risk.

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Recurring Record-Breaking

Recurring Record-Breaking 1603 511 Davis Cherry

As we like to say at Adapt Ready, “the past is no longer a predictor of the future.” That’s certainly becoming the case given the recurring record-breaking news coming from the world’s leading institutions.

On January 20, 2016, NASA and the National Oceanic and Atmospheric Administration both announced that 2015 was the warmest year “by widest margin on record.” Much of 2015’s strange weather, from a snowless December on the U.S. East Coast to more than a decade’s worth of rain in 24 hours in Chile’s Atacama Desert (while record temperatures were recorded on the Antarctic peninsula), can be attributed to the periodic El Niño. However, climate change drove record temperatures likely independent of El Niño.

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With 2016 predicted to be another record setter, will continued record-breaking galvanize further action to halt accelerating climate change or be perceived as a commonplace occurrence?

Regardless, climatic changes and extreme weather will continue to change in frequency and intensity over the coming years. And, what ultimately matters to communities, organizations and decision-makers are the smaller-scale impacts from these larger global macro trends.

Communicating how and when these increasingly hard to predict climate impacts will affect our customers is Adapt Ready’s core mission.

Watch this space.

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