Has climate change become a business story?

The cost of brushing science aside


Where it hurts Tidal surges from big, climate-change-driven storms are eroding valuable waterfront property in Miami Beach. (Seth Resnick / Science Faction / Corbis)

One of the more robust periods of study in the modern history of climate change has taken place this past year. It began in September 2013 with a report from the United Nations’ Intergovernmental Panel on Climate Change, which supported the idea that a large portion of fossil fuel reserves will have to stay underground to avoid dangerous rises in temperature across the planet. Then, in March, came one from the American Association for the Advancement of Science, which claims to be the world’s “largest general scientific society.” Among its conclusions was that we are at risk of pushing the earth’s climate system toward “abrupt, unpredictable, and potentially irreversible changes.” By May, the federal government had weighed in with the Third National Climate Assessment, making similarly dire predictions and underscoring the wisdom of its prophesies made five years earlier. 

But something different happened in June. Another report, yes. Only this one was of a different character. It was called “Risky Business,” and the team that produced the analysis wasn’t at all like the other climate-change sages. It was co-chaired by A-list titans of American business and former government officials, including Michael Bloomberg, former Treasury Secretary Henry Paulson, and hedge-fund billionaire Tom Steyer. With such headliners, media coverage wasn’t hard to come by. 

The novelty of the report was that it talked relatively little about science and more about what this whole threat is going to cost us. With its emphasis on the economic impact of climate change, it broke down each region and endangered economic sectors to assess the looming damage. And with this shift in focus—from the physics of climate change to its financial consequences—came a subtle yet perhaps significant change in media coverage. While science and political reporters have primarily covered the topic during the past decade, the “Risky Business” report garnered the attention of business reporters and their editors.

The Wall Street Journal and the Financial Times published stories ahead of the report’s release. Leading business publications, including Forbes, Fortune, and the International Business Times, ran high-profile articles on their websites the day of the press conference. Steven Mufson, an energy and finance reporter, wrote about it for The Washington Post, and the Los Angeles Times’ report ran in its Business section. Long-time economics correspondent John Ydstie covered the news for National Public Radio. The New York Times was one of the few publications to cover the event as a science story. Environment and energy reporter Kate Sheppard covered the news for The Huffington Post, but her piece was accompanied by the headline: “Hardcore Capitalists Warn That Climate Change Is A Big Deal For American Businesses.”

As extreme weather events become more frequent and intense, there’s a growing understanding that the costs could be catastrophic.

Not since the UK’s 2006 Stern Review on the economic impacts of climate change has the lens so tightly focused on the financial aspects of the story. The public stature of Bloomberg, Paulson, and Steyer helped grab headlines, but it was the idea that doing nothing to mitigate climate disruption carried major financial risk that upended the usual cycle of debate. Pulled in a new direction, the discussion tapped into social anxieties about economic instability and the fragility of American infrastructure and food production under stress after several years of successive drought and extreme weather events. Business reporters, like political and economic elites, seem to have brought a degree of legitimacy to the climate-change story by putting it in terms that most anyone can understand—money.

“There have been so many reports that have come out in 2014 on climate and all of them have basically shown increasing concern, increasing awareness of climate change. Yet ‘Risky Business’ stands out and is possibly the most significant one,” says veteran environmental journalist Bud Ward of Yale Climate Connections, which provides analysis of climate-change coverage. “I think it helps to move climate change off the science page, where it has been ghettoized.”

At the heart of “Risky Business” is the economic analysis of the Rhodium Group, which applied a risk-management approach to climate change. Risk-management analysis identifies likely financial losses due to things like legal liabilities, uncertainties in credit markets, and the probability of infrastructure failure. 

In other words, “Risky Business” identifies the likely impacts of climate change—heat waves, rising sea levels, prolonged droughts—and estimates how much they might cost 50 years from now, or by the end of the century, if greenhouse-gas emissions continue to rise at current rates. The report breaks down these costs by region and economic sector, because, say the authors, climate change will affect business differently from state to state. 

The authors project that by 2050, between $66 billion and $106 billion worth of coastal property will be below sea level. The productivity of outdoor workers, such as in construction, utility maintenance, landscaping, and agriculture, particularly in the Southeast, could shrink by as much as 3 percent as the number of days with temperatures topping 95 degrees soars. And agricultural yields in some regions could plummet by as much as 70 percent due to extreme heat.

Matthew Lewis of Next Generation, an organization cofounded by Tom Steyer and focused on combating climate change, says that businesses are less concerned about what impact climate change will have on the overall economy. “Businesses are most often in regional economies, not a national one. The climate story has largely been locked in the story of rising sea levels and polar bears. That’s very compelling but never really goes at what does this mean for your bottom line,” he says. “Sea levels are going to rise. But at the edge of the water is someone’s home. It’s a logical progression, where the water overtakes a home, that’s where the story is.”

Because “Risky Business” delves into the particular effects that climate change will have on each region of the United States, it offers not only an economic angle but specificity that is relevant to readers within a reporter’s media market. 

Says Yale’s Bud Ward, “It’s called global climate change but of course the implications are regional.” 

In addition to the Mufson piece, The Washington Post ran a story in its Economy section on coastal real-estate development along North Carolina’s Outer Banks. It’s an example of the report’s regional and economic specific focus. The often abstract and scientifically coded story of climate change can be described in terms that address readers’ concerns about their bottom line and about their communities rather than far-off settings such as the poles and low-lying Pacific Islands, however important those may be. Hurricane Sandy provoked questions about the efficacy of coastal development in New York and New Jersey. “Risky Business” has added a price tag, just as it offers a basis for assessing potential losses from drought and heat waves in the Midwest and the South, and from forest fires in the Northwest. 

Stephen J. Adler, editor in chief at Reuters, sees “Risky Business” less as a novelty and more as one interesting input in its coverage of climate change. But for Reuters and others, he says, it’s an issue with “enormous business and economic consequences.

“Our customers in business and finance face new risks and in some cases new investment opportunities as a result of climate change,” says Adler. “Their interest is less a theoretical one than a practical one, as they re-assess their strategies and practices in light of climate-related issues.”

Adler points to what many others, including Yale’s Ward, describe: As extreme weather events become more frequent and intense, there’s a growing understanding that the costs could be catastrophic. 

One publication that has long covered climate change with an eye toward the economic impacts is ClimateWire, the DC-based news service that is part of Environment & Energy Publishing. Editor John Fialka and reporter Evan Lehmann have published dozens of articles tracking trends in the insurance industry—an economic sector that stands to lose billions of dollars, but also one that offers a potential way to mitigate the problem by increasing premiums in ventures likely to be affected by climate change, whether coastal development or agricultural production. By raising the price of risk, the industry drives investment away from volatile projects and toward more secure ones, such as housing that isn’t susceptible to frequent flooding or crops that might withstand higher temperatures. “Climate change has always been, at its heart, an economics and business story,” says Fialka. “Insurance companies can sometimes change peoples’ behavior more effectively than governments can.”

Fialka points to the rebuilding of Chicago after the Great Fire of 1871. Insurance companies forced the city to require that homes be rebuilt with brick rather than wood, which had fed the conflagration that left 300 dead and 100,000 people displaced. “They had a city of ramshackle wooden houses. It’s easier for a company to come in and say, ‘Well, if you’re going to rebuild the right type of building, we’ll insure it. But if you don’t, we won’t,’ rather than the government flat-out requiring it,” he says. 

It’s a story that hews closely to today’s political landscape. Facing pushback from coastal constituents who were going to see their premiums rise, Congress voted in March to limit annual flood-insurance rate hikes to 18 percent per property. Meanwhile private insurance companies, most significantly the large reinsurers, are taking increasing notice of the risks to their bottom lines in underwriting property in flood-prone locations or along the coasts. 

It’s a vital beat that is largely being ignored, says Fialka, due to a combination of publications’ disinterest in the opaque world of insurance markets and the industry’s press-averse nature. “The insurance industry is a very conservative industry; they don’t like to call attention to themselves,” says Fialka. “So the press doesn’t cover it. I can show you a whole lot of business reporters but I bet maybe 10 percent of them cover insurance.”

Fialka says his interest in insurance was born from his interest in the law, a career path he abandoned in order to become a journalist. He worked at The Wall Street Journal more than 20 years prior to launching E&E’s climate service. 

ClimateWire is admittedly a niche publication geared to the well-informed lobbyists and regulators of the DC beltway or those working within economic sectors attuned to climate change debates. But, as demonstrated by The Washington Post’s piece on the Outer Banks, the arcana of insurance policy might become a headline-grabbing beat when linked to specific economic risks in any given region in the country. 

And insurance companies aren’t just evaluating coastal and flood-prone areas; farmers in America’s heartland benefit from crop insurance and federal disaster relief when their fields wither under extended droughts and heat waves. If Fialka is right, it could even become a beat for an enterprising health reporter. “In the case of cities and heat waves, I suppose health-insurance companies could rate health risks,” he says, noting that the shortage of trees in Louisville, KY, exacerbated its heat problem. “Health insurers could say this is an unhealthy community likely to have a lot of heat-related deaths and sickness and rates have to go up unless you guys plant some trees. 

“There are a lot of opportunities to cover the business and economics of this, and there will be more as climate change gets worse,” says Fialka. 

But he warns that it’s a difficult story to tell not only because of the industry’s press-shy disposition. “They’re a peculiar entity because there’s not much federal regulation of the industry; they’re governed by insurance commissioners in 50 states,” says Fialka.

“There’s a need on the industry’s part to be better communicators and there’s a need on the part of reporters to pay more attention to it—how it works, how it should work.”

Next Generation’s Lewis, who served as communications director on the “Risky Business” team, says that members of the project’s committee will continue to talk about climate change. Former Housing and Urban Development Secretary Henry Cisneros is active in the real estate investment sector, and Gregory Page, executive chairman of the board of Cargill, Inc., the nation’s largest privately held corporation, wields influence in the world of agriculture and commodities trading. Both intend to discuss climate change frequently and try to influence editorial boards, says Lewis. 

“Members of the Risk Committee will stay engaged, reinforcing the notion that climate change is a business story,” he says. “Business desks are starting to see this as their story. Science is in the rearview mirror.”

Robert S. Eshelman is a Brooklyn, New York-based freelance journalist and associate producer on the Showtime series "Years of Living Dangerously." This story was published in the September/October 2014 issue of CJR with the headline, "Risky business."