18 May 2020

Understanding climate security through assets

Iggy Bassi

By Iggy Bassi

Understanding climate security through assets

“Climate security” has been discussed for several years, yet understanding of the term is not widespread and lacks a clear definition. Moreover, often it is used in a limited way, failing to encapsulate the broad sense in which climate change threatens security.

Traditional security actors, such as the military, use climate security to refer to climate change affecting military readiness or increasing conflicts and political instability. The focus is here on national security. In contrast, a human security approach looks at how individuals are impacted by climate change, especially marginalised groups. Nevertheless, their vulnerability to climate change is rarely referred to in terms of ‘climate security’.

While the UN Security Council focuses on national security threats due to climate change, the UN SDG goals and bodies such as the UNDP emphasise the threats humans face. While neither approach to security is wrong and they do overlap, they only cover one aspect of climate change’s impacts.

An all-encompassing definition of ‘climate security’

Rather than focusing on either macro or micro stakeholders (states or individuals), climate security should encompass the multiple levels climate change affects. Climate change impacts everyone and everything. Even areas that escape its negative effects will still feel them indirectly due to the interconnectedness of our globalised world.

States and individuals are not the only ones affected by climate change nor should they be the only ones to take action. Business decision makers are crucial in transitioning to a zero-carbon economy and adapting to a warmer world. For their own security they need to understand the risks posed by climate change.

A stable climate is the basis for all types of security: human, national, corporate, environmental and ‘planetary’. ‘Climate security’ refers to the risks posed to every part of our world by climate change. This is not to support alarmist narratives but to highlight the seriousness of the problem and the need for all actors to take responsibility.

Focusing on assets

At Cervest we understand climate security as protecting businesses, governments and communities from climate-related disruption in order to safeguard vital economic and social values. We believe the only way to address this urgent matter is to measure it, which is why we focus on assets as a way to make climate security tangible.

Assets are anything that has economic, social or ecological value: a house, farm, office building, factory, train tracks or a powerplant. It also includes forests, seas and entire ecosystems. Assets form the basis of most forms of security including economic, human, and national security. This is most obvious in publicly owned critical infrastructure, providing transport, energy, water and communications.

All assets are affected by their environment – some more directly than others. This is true both for the asset itself and its location, which is optimised for factors such as market access, water or infrastructure. For all those assets, we must understand their exposure and resilience to climate-related risks.

Why care about climate security now

Scientists have been warning of climate change for decades. Nevertheless, the impacts are now clearer and more widespread than ever, highlighting the need for organisations to address their climate security urgently.

Public pressure is mounting for governments to implement climate policies and for businesses to become more sustainable. Investors, insurers and banks are adding to this pressure as they need to understand the risks of their portfolios and recognise that climate change will be a significant and potentially a systemic risk. Understanding climate risks is likely to become mandatory for companies, although disclosure of climate-related financial risks is still voluntary for now.

The norm is already shifting regarding disclosing carbon emissions. Next, organisations need to start addressing not only how their business operations contribute to causing climate change, but also how they are affected by it. For instance, the Task Force on Climate-related Financial Disclosures (TCFD) asks companies to assess and quantify how their business operations are affected by physical climate risks.

Despite climate change set to cause disruptions all across supply chains, economic efficiency is still prioritised over resilience. Financial losses due to climate change will increase as both physical and natural capital assets are at risk of being damaged. It is therefore time that climate security is prioritised by boards as well as policy makers given its strategic threat.

An example: flooding and climate security

Changing precipitation patterns is one of the consequences of climate change, having caused, for instance, bushfires in Australia while the UK saw the wettest February on record. Both cases of extreme weather cost the respective economies billions of dollars. In order to clarify how climate security is best understood through assets, we examine how flooding in the UK impacts various assets and the knock-on effects.

The sector most impacted is the one whose assets directly depend on rain: agriculture. Crops require a stable climate as drought or flooding cause damage, leading for instance to the cauliflower shortage last summer. A temporary lack of cauliflower is not the worst case scenario. However, farm businesses are severely impacted by flooding, leaving the farmer with huge costs while reduced food supplies can lead to a rise in food prices. As the climate crisis worsens, more crops are at risk worldwide making the food supply chain increasingly insecure.

Thousands of homes were also damaged in recent flooding. Besides affecting the inhabitants and homeowners, just as with food supply there is a ripple effect. With homes destroyed, damaged or at increasing risk, their value will decrease. While homeowners face direct financial losses, increased insurance claims could result in higher premiums as insurance becomes more expensive. Meanwhile, insurance does not cover devaluation of property, which can have knock-on effects for the real estate sector and the local economy. McKinsey’s 2020 report on climate risk analyses these effects, including reduced government spending as decreased property value leads to less property tax revenue.

Other assets damaged by flooding include shops, pubs, schools, office buildings, and factories. The owners – small businesses as well as large corporations – are always the first affected, with consumers and workers second. 40% of businesses would not reopen ‘after suffering a catastrophic loss from flooding’ – an important statistic for business leaders as well as financial services to be aware of. Many others will also be impacted by the ripple effects along the supply chain and through the local community.

Impacts grow as more people depend on an asset. Therefore, policy makers and public bodies should be concerned about climate security not just because it affects citizens and businesses and therefore economic activity. They should be directly concerned about damage to critical infrastructure including transport, energy, water and communications. When assets such as rail networks, roads and power plants are damaged, the knock-on effects are vast. To give a monetary example: each major road affected by flooding costs the economy up to £100,000 per hour.

This is a glimpse of the domino effect that extreme events such as flooding can lead to. The probability of their occurrence is rising and according to scientific consensus can only be halted by reducing emissions. Meanwhile, everyone needs to adapt to new precipitation patterns that are already inevitable. The examples above show that assets form the basis of most forms of interconnected security. They also demonstrate that actors at all levels need to think about their climate security.

Providing climate security through data

Climate security is not being used in its broadest sense, despite this being exactly what it is about: the vast range of risks caused by climate change. It is a multi-level problem, not confined to either military, carbon intensive sectors, or individual climate action. Our definition of climate security establishes a new category addressing this through a focus on asset-level risk. Assets are directly linked to people’s incentives while also the easiest to measure risk for.

Although most people are aware of climate change, serious attention to understanding one’s own climate security is lacking. Mainly because while the general, high-level consequences are understood, no one knows the risks specific assets are exposed to. Cervest’s mission is to provide that information.

We leverage a range of climatic, weather and other data which combined with machine learning allows us to understand the impact of climatic factors on land-based assets. A holistic view of climate security is essential, because it depends on a range of variables. Our models combine these to understand the aggregate risks.

Quantifying personalised climate risk allows people to operationalise climate security. We want to make climate security more tangible to facilitate the appropriate actions based on informed decisions. With the latest scientific advancements and increased availability of computational power, we can understand climate security in numbers and incorporate it into everyday decisions.

Finally, an increasingly digital world means this information can be made accessible to all: businesses, home owners, insurers, risk management bodies, governments, actors up and down the supply chain and throughout society. Climate security is essential to everyone, therefore it is crucial to provide open access to information on how climate secure assets are.

If you’re interested in Cervest’s work to help provide climate security for all, then please head over to our careers page!

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