Fall weather this year in Vancouver was spectacular. In a city known as ‘Raincouver’, the sun shone day after day and t-shirt weather stuck around way past anything that might be considered reasonable.
It was a lovely thing to behold – except for the drought, the dry riverbeds and hundreds of thousands of dead fish. Between July and October, Vancouver (and the southern part of the Canadian province of British Columbia where it lies) received 90% less rain than normal, with just 16mm rather than the usual 165mm.
The blue skies and shining sun, it seems, were less a blessing and more of a sign, yet another, of the risks associated with climate change.
An ‘atmospheric river’ destroyed highways, releasing more rain in a couple of days than in an entire year
The same message had come through in much louder and dramatic fashion not 12 months earlier. In October 2021, an atmospheric river – a long narrow band of concentrated water vapour – destroyed highways and froze travel out of Vancouver. More rain fell in a couple of days than in an entire year. The atmospheric river followed on the heels of a heat dome – an area of trapped hot ocean air – during the summer that caused record high temperatures, droughts and deaths.
The combination was devastating. The heat in the dome had baked the soil, creating a hard surface that did not soak up the torrential rain that came afterwards but let it slide across and flood low-lying areas, decimate crops, isolate communities, kill cattle and literally break all three highways that connect Vancouver with the rest of Canada. The atmospheric river left Vancouver isolated for weeks. By Christmastime, thanks to a herculean engineering effort, one highway into the interior had been opened. The tourism industry, already hurt by years of Covid-19 restrictions, took another giant hit. So did the economy, with logistics costs jumping and supermarket shelves running bare.
Things did not get much better this year. In September 2022, Hurricane Fiona rampaged up the east coast of North America, devastating Puerto Rico and all points north on its way to the Canadian provinces of Nova Scotia and Prince Edward Island and beyond. It was the most expensive storm ever to hit the country, with the cost of destruction pegged at more than Can$600m (US$440m).
Climate change is no longer a theoretical risk to business but a practical one, even in the most developed economies in the world and the most stable climes. The weather is changing and not for the better. Businesses would be remiss not to take it into account as much as they take supply chains into account, or the potential for theft, profit margins or advertising.
Small businesses would be well advised to consider the risks of climate change in their business plans and operations. Small convenience stores across Vancouver in late 2021, for example, lost sales when delivery trucks could not make deliveries.
Big businesses, in turn, are also increasingly expected not only to account for climate-related risks but also to report on what actions they are taking to address them. Regulators and investors increasingly expect such things, while accountants and finance professionals are regularly called on to support both the risk management and reporting, while facilitating more thorough disclosures and higher levels of transparency around climate matters.
For businesses, the most obvious and visible impacts are around the impairment of assets
Laws and regulations are falling into place in most markets to also account for both risk management and reporting.
For businesses, the most obvious and visible impacts of climate change and climate disasters are around the impairment of assets – essentially properties being damaged or destroyed, infrastructure breaking down, water damage, and so on. But climate events also have to be taken into account when considering the useful lives of assets, human resources, the fair value of assets, insurance, provisions for replacement of assets and more.
And none of this takes into account new areas of accounting, such as carbon accounting and how businesses deal with carbon credits or carbon trading schemes.
These are all considerations for the here and now. The risks are not only real but very visible. The costs are growing higher.
In North America, climate events have become expensive, and the trend is only likely to get worse going forward.
It is estimated that a decade of climate change will have taken a Can$25bn chunk out of GDP by 2025
One report by engineering firm GHD suggests that water-related risks could cost Canada Can$139bn by 2050. Meanwhile the Canadian Climate Institute has estimated that a decade of climate change will have already taken a Can$25bn chunk out of GDP by 2025.
This is lost growth that an economy coming out of Covid-19 and likely heading into a recession can ill afford.
In the US, there have been 338 weather and climate disasters since 1980. The National Centers for Environmental Information puts the total economic cost at close to US$2.3 trillion, and the death toll at 15,689.
Even more concerning is the increasing incidence of significant weather events. During the 1980s, there were 31 significant weather events recorded in the US that could be classified as disasters, or 3.1 a year. By the 2010s, that figure had soared to 12.8 a year. In the year to October 2022, there were 15.
The worst impacts of climate change are no longer a theoretical bogeyman for a time in the medium-term future when temperatures rise more than 1.5 degrees Celsius. They are already here, and they have very real consequences for businesses and economies.
Read the AB articles ‘Toolkit for green budgeting,’ ‘Sustainability accounting will support governments,’ and ‘Climate inequalities in the balance’