With the exception of a limited number of funds, the financial sector has not accounted for the risk associated with climate change. This is a scary situation because it means that at some point, when climate change becomes irrefutably obvious or regulations force recognition (such as the SEC rules to report ghg output), markets will recognize these risks. The last time the global financial sector realized unappreciated risk was in 2007, resulting in the deepest recession since the 1930′s ( for an excellent dramatization of the market’s moment of realization, see the film Margin Call). The markets will eventually price commodities closer to their actual value (higher) and more accurately accounting for environmental volatility (also high). In this case, inflated prices would be double strength, caused both by accounting for the climate change weather risk, and accounting for the resource scarcity that results.
Forget the Fiscal Cliff – Will the Climate Cause the Next Recession?
A few years back I had this epiphany that climate change, peak everything and our economic downturn dovetailed into a perfect storm of hurt.
Get ready. Share in comments what you plan to do.