One Step Closer to a More Resilient U.S.
After many failed infrastructure weeks, President Biden and Congressional leaders can share a victory lap for finally signing into law the most extensive infrastructure package our country has ever seen. Not only will the law upgrade aging infrastructure, but it ambitiously funds climate resilience, something never seen before.
Part of the law includes $47 billion to reduce flood risk and damage, and for wildfire modeling and forecasting, among other key climate investments. These types of investments will help better understand the specific risks of natural disasters and minimize the impact these events have on damage to our homes, businesses, communities and economy.
This is a good starting point for our country because climate-related events are projected to have increasingly destructive economic impacts.
We have faced 285 weather-climate disasters, costing American lives and almost $2 trillion. And many recent disasters are billion-dollar events. This year, we’re on pace for a historic $104.8 billion in costs, and the threat, if unaddressed, will grow exponentially. Treasury Secretary Janet Yellen recently stated climate risks are an “emerging and increasing threat to U.S. financial stability.”
Preventing climate-related financial calamity will require not just money but evolving the way we think about ESG to account for resiliency — the way our current systems are able to handle and build back in the wake of disaster — as well. Our private institutions need to take a page from Congress’ bipartisan infrastructure bill and add resilience to their operations.
Countless companies have made net-zero commitments. And while emissions reductions are certainly a necessary effort, it’s simply not enough. We’re past the point where emissions reductions on their own can have an outsized impact. Instead, we need to be thinking of climate impact exposures and vulnerabilities — the other side of the coin.
Today, we rely on more than 600 ESG ratings and rankings, but none of them address the issue of resilience. This makes it impossible to make effective decisions that account for this overlooked aspect of ESG considerations.
Whether investors are evaluating a company or an individual infrastructure project, the resilience of all stakeholders will become increasingly important to assess whether public infrastructure, owned assets, and social protections can withstand future climate crises.
This can be achieved by developing a new lens through which to consider the standard of global resilience. Organizations across the public and private sector need to come together to develop a framework to assess business; capacity to effectively plan for, recover from and adapt to the realities of climate change — adding an R to the traditional ESG reporting, for resilience.
Traditional ESG assessments consider important factors like carbon footprint and water and waste management. But these considerations aren’t a company’s full exposure to climate change disasters. Many existing business continuity plans don’t consider important factors like the risks to a location’s power supply lines or transit vulnerabilities.
Similarly, existing assessments don’t take into consideration business risks from workforce vulnerability, like a pandemic or other public health crisis. Covid has been an influential factor for private and public sector actors to evolve their thinking around risk. Companies and industries shouldn’t wait until a similar climate-related disaster hits to evolve that same style of thinking around ESG expectations.
Like other aspects of ESG, better understanding and accounting for risk doesn’t just benefit individual companies. It helps transform the economic system to incentivize resilience actions that benefit everyone and make the world more adept at understanding and responding to climate-related risk.
Better incorporating resiliency will create a more accurate picture of how the world will look in the future, ensuring we can respond more quickly and recover more effectively if something terrible does happen.
The initial investment from the infrastructure bill is a critical first step in this process. But as our communities face the generational challenge of climate change, we must set a standard for resilience metrics to face inevitable climate threats that more holistically builds these concerns into business-as-usual. Before a future crisis forces us to, building resilience metrics is a critical undertaking for the business community.
Ahmad Wani is CEO and Co-Founder, One Concern, a climate resilience tech firm.