Sooner Or Later, Climate Change Is Coming For Your Wallet

Last week Gary Gensler, the chair of the Securities and Exchange Commission, made what seemed like an uncontroversial statement: “I think we can bring greater clarity to climate risk disclosures.” The SEC, he said, will begin to consider requiring public companies to tell their investors how climate change could threaten their business. That’s an important step, because for as much as we know about how the climate crisis is changing our lives, we’re only starting to get our heads around what it will truly cost you and me.

The oil and gas industry is already pushing back. Industry groups are stepping up lobbying to avoid disclosing their emissions, according to the Financial Times. These short-sighted attempts will unfortunately hurt our economy.

According to a report released in April by SwissRe, the global reinsurance company, the U.S. economy stands to lose 10% of its economic value by 2050 under a worst case scenario, where average global temperatures rise 3°C compared to pre-industrial levels. The SwissRe “worst case” scenario, however, is our current reality—one in which temperatures remain on their current trajectory, and both the Paris Agreement and 2050 net-zero emissions targets are not met.

To some, SwissRe’s projection of a 10% loss in 30 years may not sound alarming. But that datapoint can otherwise be stated as: The U.S. will suffer natural disasters such that it is not expected our economy will be able to recover from them. The prospect of suffering damage so profound that we are unable to economically recover is alarming. And it is not a distant future.

Scientists had hoped that Covid-related disruptions would produce a large reduction in carbon emissions. But the reductions were less than expected. The world produced only 6% less carbon last year than the one before. This modest response to an unprecedented synchronous global shutdown of economic activity puts the scope and scale of current emissions into perspective. To quantify the challenge, the Intergovernmental Panel on Climate Change indicates that emission reduction ranges must be around 45% lower than present to meet a 1.5°C temperature goal.

Weather and climate disasters cost the U.S. economy $450 billion (2.1% of GDP) in 2020, the highest year on record. And we hold the No. 1 spot for the number of disasters year-to-date according to EM-DAT, a database that tracks disasters globally. We also know climate change has made most of these events worse than they would have otherwise been.

The mere 1°C temperature increase that has already occurred has contributed to new water shortages in towns across California, Nevada, Arizona, and New Mexico. Increasing evaporation has also reduced soil moisture, which helps explain the $7 billion to $13 billion cost to insurers from the 2020 wildfires. Costs that will inevitably translate into a higher price tag to you, the consumer.

The future costs of climate change on the U.S. economy are uncertain, but what is worse is that they may be underestimated. Underestimation occurs because projections are often made using an enumerative approach, where losses are valued sector by sector and then tallied to estimate the total impact on social welfare.

In other words, current approaches miss cascading risks, problems that exacerbate other disasters in unforeseen ways. Global supply-chain disruptions are an example of why cascading risks are difficult to model—because all industries can be affected when businesses of all sizes as well as national and subnational governments are interdependent. Economic disruptions from Covid-19 provide a case in point. The pandemic highlighted the vulnerabilities of complex supply chains that are now ubiquitous. As severe weather events continue to worsen, the U.S. economy will continue to suffer shortages — not only from domestic disruptions to products like orange juice, corn, and soy, but also from disasters abroad. The regions that produce most semiconductor chips and rare earth elements, critical in computers, smartphones, aerospace and defence, and medical appliances are concentrated in regions particularly vulnerable to climate hazards.

The economic consequences of climate change are countless. Under the last administration, the U.S. Commodities and Futures Trade Commission released the first-ever assessment of the impact of climate change on the financial system. The 196-page report’s first sentence reads: “Climate change poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy.”

The good news is that scientists, economists, and financial regulators agree on what needs to be done—even the oil and gas executives are on board. The key recommendation from the CFTC is that “The United States establishes a price on carbon. It must be a fair, economy-wide price… at a level that reflects the true social cost of those emissions.” The authors go further, stating that “a carbon price is the single most important step to manage climate risk and drive the appropriate allocation of capital.” The SEC’s moves toward mandatory climate risk disclosures are first steps on that path.

But if you’re not in a position to influence the risk calculus of public companies, there is something else you can do. You can buy insurance. The IMF’s researchers find that insurance penetration is a top factor in determining the resilience of a country to the impact of climate change. Yes, it might cost you a little more than you expected to spend this year. But climate change is coming for your wallet sooner or later.

About the authors: Jennifer R. Marlon is a research scientist at Yale University’s School of the Environment. Bianca Taylor is founder of Tourmaline Group and a member of the Bretton Woods Committee. The two are public voices fellows of the OpEd Project and the Yale Program on Climate Change Communication.

As the war against Hamas dragged into 2024, there were worries here that investment would dry up in Israel’s globally important technology sector, as much of the world became angry against the casualties in Gaza and recoiled at the unstable security situation.

In fact, a new survey found investment into Israeli technology startups grew 28% last year to $10.6 billion. The influx buoyed Israel’s economy and helped it maintain a war footing on several battlefronts.

The increase marks a turnaround for Israeli startups, which had experienced a decline in investments in 2023 to $8.3 billion, a drop blamed in part on an effort to overhaul the country’s judicial system and the initial shock of the Hamas-led Oct. 7, 2023 attack.

Tech investment in Israel remains depressed from years past. It is still just a third of the almost $30 billion in private investments raised in 2021, a peak after which Israel followed the U.S. into a funding market downturn.

Any increase in Israeli technology investment defied expectations though. The sector is responsible for 20% of Israel’s gross domestic product and about 10% of employment. It contributed directly to 2.2% of GDP growth in the first three quarters of the year, according to Startup Nation Central—without which Israel would have been on a negative growth trend, it said.

“If you asked me a year before if I expected those numbers, I wouldn’t have,” said Avi Hasson, head of Startup Nation Central, the Tel Aviv-based nonprofit that tracks tech investments and released the investment survey.

Israel’s tech sector is among the world’s largest technology hubs, especially for startups. It has remained one of the most stable parts of the Israeli economy during the 15-month long war, which has taxed the economy and slashed expectations for growth to a mere 0.5% in 2024.

Industry investors and analysts say the war stifled what could have been even stronger growth. The survey didn’t break out how much of 2024’s investment came from foreign sources and local funders.

“We have an extremely innovative and dynamic high tech sector which is still holding on,” said Karnit Flug, a former governor of the Bank of Israel and now a senior fellow at the Jerusalem-based Israel Democracy Institute, a think tank. “It has recovered somewhat since the start of the war, but not as much as one would hope.”

At the war’s outset, tens of thousands of Israel’s nearly 400,000 tech employees were called into reserve service and companies scrambled to realign operations as rockets from Gaza and Lebanon pounded the country. Even as operations normalized, foreign airlines overwhelmingly cut service to Israel, spooking investors and making it harder for Israelis to reach their customers abroad.

An explosion in negative global sentiment toward Israel introduced a new form of risk in doing business with Israeli companies. Global ratings firms lowered Israel’s credit rating over uncertainty caused by the war.

Israel’s government flooded money into the economy to stabilize it shortly after war broke out in October 2023. That expansionary fiscal policy, economists say, stemmed what was an initial economic contraction in the war’s first quarter and helped Israel regain its footing, but is now resulting in expected tax increases to foot the bill.

The 2024 boost was led by investments into Israeli cybersecurity companies, which captured about 40% of all private capital raised, despite representing only 7% of Israeli tech companies. Many of Israel’s tech workers have served in advanced military-technology units, where they can gain experience building products. Israeli tech products are sometimes tested on the battlefield. These factors have led to its cybersecurity companies being dominant in the global market, industry experts said.

The number of Israeli defense-tech companies active throughout 2024 doubled, although they contributed to a much smaller percentage of the overall growth in investments. This included some startups which pivoted to the area amid a surge in global demand spurred by the war in Ukraine and at home in Israel. Funding raised by Israeli defense-tech companies grew to $165 million in 2024, from $19 million the previous year.

“The fact that things are literally battlefield proven, and both the understanding of the customer as well as the ability to put it into use and to accelerate the progress of those technologies, is something that is unique to Israel,” said Hasson.

Sooner Or Later, Climate Change Is Coming For Your Wallet

The impact on the environment will soon extend to the economy.

The 28% increase buoyed the country as it battled on several fronts but investment remains down from 2021