Rising climate costs to challenge countries and companies in 2023

By Katy Daigle

(Reuters) – In a year marked by even more climate-related floods, hurricanes and droughts, governments and businesses have been forced to take a closer look at financial risks and their exposure to liability.

Nowhere was this more evident than at the UN climate conference in Egypt, where countries reached a landmark agreement to establish a fund to help poor countries meet the costs of climate-induced disasters.

However, the COP27 talks in Egypt did little to address the root cause of those disasters – the ever-rising levels of greenhouse gases in the atmosphere.

That kind of slow progress in tackling climate change left vulnerable countries determined to get the so-called Loss and Damage Fund approved — after another year of extreme weather disasters, including record heat waves from the United States to China, glacier collapses in India and Europe, and endless drought pushing millions to starvation in East Africa.

Insurers felt the pain as the year brought three of the most costly disasters of the decade – “dystopian” floods that caused $40 billion in damage to Pakistan, a series of deadly summer heat waves that combined to cost more than $10 billion in caused losses for Europe, and Hurricane Ian is ripping through Florida and South Carolina at a cost of $100 billion, according to risk modeling firm RMS.

The Loss and Damage fund also marked a diplomatic coup by poor countries, after decades of backlash in the US and Europe over fears it could expose them to legal liability for their historic emissions. But countries agreed that the fund would draw from existing financial institutions rather than wealthy countries, removing those liability concerns for now.

WHY IT MATTER

As watchdog groups denounced companies for not disclosing how climate change could threaten them financially, investors faced growing pressure both to go too far to address climate risks and to not go far enough.

“It’s the wild west in terms of what companies should be doing. And there are those that are greenwashing, yes,” said Katharine Hayhoe, a Canadian climatologist and chief scientist at the Nature Conservancy. But some who make a sincere effort “get backlash from the culture of purity, people say anything but perfection isn’t worth it.”

Even Hayhoe and others who warned of the dangers of climate change did not escape censorship, with some activists harassing them for flying to conferences or eating meat.

At some point, people started throwing soup and paint and gluing themselves to things.

“I see,” Hayhoe said. “It’s a psychological response to the genuine fear people feel when they begin to understand the magnitude of this problem.”

Others tried to take their grievances to court. According to Columbia University’s Sabin Center for Climate Change Law, there are currently 2,176 climate-related lawsuits pending worldwide, 654 of which are in U.S. courtrooms.

And scientists and economists are making progress in calculating exactly how much a country’s activity may have contributed to climate change – and to specific disasters. This reasoning, called “climate attribution science,” has found its way into more courtrooms.

“So far it’s been a battle of the experts on paper,” said Sabin Center executive director Michael Burger. “What we haven’t seen yet is a real trial” presenting evidence for attributing a certain percentage of the obligation to a climate-polluting company or country.

But it’s only a matter of time, experts say.

WHAT DOES IT MEAN FOR 2023?

Expect more public concern in the new year as climate change continues to escalate – and more corporate and government concerns about liability and risk.

Businesses and investors will come under pressure to climate-proof their supply chains and operations.

More climate cases will be filed in courtrooms, he said — aimed both at challenging national governments to increase their climate policy ambitions and at holding companies accountable for their emissions or deceptive practices.

At the end of the year, countries will meet again at the next UN climate summit, COP28, in Dubai. And they will be under additional pressure to ensure that emissions are halved by 2030 and net zero by 2050 – the only way to keep global warming within 1.5 degrees Celsius.

“More and more powerful actors are accepting the fact that we cannot stick our heads in the sand,” says Burger.

Check out the Reuters roundup of news stories that dominated the year, and the outlook for 2023.

(Reporting by Katy Daigle; Editing by Lisa Shumaker)

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