Weather Risk – Climate Change

Published on October 26, 2021 by Entrima

Climate and weather are different concepts, but relate to each other. Different kinds of climate bring along different weather patterns. A desert climate is generally characterised by a different temperature, solar intensity and humidity than a oceanic climate. Hence, climate change has an impact on weather profiles. Regular patterns may change, while extremes may happen more often and might become more severe.

Although parties could try to benefit from potential future weather circumstances, an increasing number of companies want to shield against the risk of adverse weather conditions. Rising temperatures, more drought, an increasing number of floodings and a higher frequency and intensity of storms could disrupt ecosystems and hurt human health. Besides, it could lead to unanticipated business losses. To manage these exposures, organisations can buy an insurance or access the weather market.

In order to take measures against weather risk, weather circumstances need to be analysed. For this purpose, weather data need tob e collected and processed. Furthermore, without reliable climate-related financial information, financial markets cannot properly price climate-related risks and opportunities.

According to the United Nations Framework Convention for Climate Change (UNFCCC), extreme weather and climate change are among the top risks facing our world. In the same line, according to the Global Risks Report published by the World Economic Forum (2018), extreme weather events such as coastal storms and droughts, failure to reduce carbon emissions and build climate resilience, and natural disasters are among the top risks that pose a serious threat to global stability. Moreover, among cyberattacks, terrorist attacks, spread of infectious diseases and large scale involuntary migration, extreme weather events are ranked higher in the sense of both probability of occurance and their impact.

 

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