Rapid Changes Bring Unexpected Climate Risks

Rapid Changes Bring Unexpected Climate Risks

As climate change progresses, some transition risks will materialize rapidly, accelerate faster than environmental change, and – in the case of acute climate impacts – persist longer than an individual event or series of events. In other words, climate change is fundamentally altering social, political and economic systems.

As discussed in episode six of the Curiosity, applied. podcast, exceeding global warming of 1.5°C – even temporarily – will cause extreme weather across the globe, similar to what the world has experienced in recent months. In response, societies will cross new thresholds or ‘tipping points’. Like the proverbial straw that broke the camel’s back, risks – including transition risks – will emerge quickly and have huge impacts.

On one hand, these changes can move the world toward a more sustainable future. For example, after the Australian wildfires of 2019-2020, a shift in voter attitudes forced the government to prioritize climate change. Since then, Australia has strengthened its emissions reduction targets, set a goal to achieve net zero by 2050 and proposed mandatory climate risk disclosures for large firms. Social transformation can also include climate activism, increased litigation, and innovation in mitigating and adapting to climate change.

On the other hand, impacts can be devastating. For example, extreme drought in Syria between 2006 and 2010 exacerbated political tensions and economic instability that led to civil war. The resulting humanitarian crisis has killed hundreds of thousands of people and displaced millions. Without action to address climate impacts, experts predict that more climate-induced conflict will ensue.

Understanding the possibility of rapid social change is critical for assessing climate risks and opportunities. New policies, lawsuits and shifting customer attitudes present transition risks. Climate migration could lead to political instability, increase competition for resources and services or – more optimistically – create opportunities for economic development. Researchers from the University of Exeter have also been exploring the possibility of social tipping points to conserve ecosystems, which could reduce nature-related risks (see Verdantix Strategic Focus: Navigating Nature-Related Risks). Additionally, innovation and new technologies could lower the costs of climate action. In sum, the impacts run the gamut from catastrophic disruption to enabling breakthroughs.

A variety of tools exist that can help to deal with these rapid and hard-to-predict changes. For example, scenario analysis is a way to consider a range of possible future outcomes – including sudden change (see Verdantix Best Practices: Climate Scenario Analysis). Other approaches that complement scenario analysis include combining actions that address immediate concerns with actions that allow an organization to address new threats in the future if necessary – that is, avoiding long-term commitments that could harm business if dramatic and unexpected social or political changes unfold. Coupled with regularly integrating new information as it becomes available, this so-called “adaptive decision-making” promotes flexibility in the face of uncertainty. Similarly, robust decisions that perform well under multiple scenarios are always a safe bet. With these strategies, organizations can better withstand unpredictable and potentially abrupt social transformation – which is critical for climate resilience.