Destructive weather prompting corporate rethink on ignoring costs of climate change
'We ... need to think about how to build resilience,' economist says
Many in Canada's business community are waking up to the realities of climate change because they are bearing the brunt of paying for it — and starting to plan accordingly.
Jim Mandeville knows first-hand the types of destructive weather-related events that businesses are having to deal with. A senior project manager for large loss at Toronto-based recovery firm FirstOnSite, Mandeville is who you call "after anything bad has happened," as he puts it.
"It's sort of like the undertaker bragging, but business is good," he says. "Definitely good."
FirstOnSite is a full-service disaster reconstruction firm, meaning it can help out with all parts of the process — from drying out flooded residential basements to helping manufacturers rebuild storm-damaged facilities, and even helping governments plan and zone better before calamities hit in the first place.
Mandeville personally helped out with cleaning up the Calgary Saddledome in 2013, when flood waters rose to unprecedented levels in the spring of that year.
He says the lion's share of his business these days is with companies looking to upgrade and guard against the worst.
Some may still question the veracity and severity of climate change, but Mandeville says there is little dispute among his team and his customers about what they're seeing on the ground.
"A lot of companies are waking up to this because they're having to deal with it."
Economist Craig Alexander with accounting firm and consultancy Deloitte says it can be a mistake to take individual violent weather events such as Hurricane Florence or the recent spate of wildfires in British Columbia and tie them directly to climate change. But on the whole, he says, "we certainly are seeing increased frequency of these events, and they are taking an economic toll."
Alexander says economists, policymakers and companies are already stress testing the impact of disasters we know will come as part of their basic risk-management policies. When he worked at the Royal Bank of Canada, he says, the bank would routinely try to crunch the numbers on what the economic toll would be for things like a major earthquake in British Columbia, or a wildfire in northern Alberta knocking much of Canada's oil output offline.
While the environmental community and big business often see each other as having competing interests, Alexander says that's not necessarily the case.
A lot of the dialogue about climate policy is about how to reduce emissions, he says, "but increasingly we also need to think about how to build resilience." Alexander says it is a noble goal to try to reduce emissions over the long term, but "we can already see the damage," so taking steps to mitigate damage just makes sense.
In Canada, Alexander says, one of the best ways of doing that may be to focus on outdated infrastructure.
According to the most up-to-date government estimates, Canada has more than $140 billion worth of assets such as roads, bridges, sewers and transit projects that were considered to be in either "poor" or "very poor" condition as of 2016.
That's a big liability looming on the horizon, and businesses and governments are getting ready for it.
It's not hard to come up with recent examples of worst-case scenarios that materialized.
Major storms such as Hurricane Florence are routinely costing far more than they used to, and while the strength of modern hurricanes is part of the problem, a big factor in why the price tag keeps going up is poor planning and inadequate reconstruction.
But hurricane-prone parts of the U.S. aren't the only places seeing their bill for catastrophic weather events going up. Toronto has seen multiple devastating floods in recent years, and its antequated infrastructure has made the problem worse, experts say.
"If we can build infrastructure that can cope with climate change, it will be less disruptive," Alexander says.
Taking precautions can do more than simply protect businesses from unexpected costs. If done right, it can make them even more money down the line.
No less an authority than the CEO of Quebec's pension plan said as much last week, telling an investment conference that the $308-billion Caisse de dépôt et placement du Québec fund he runs plans to invest more in renewable energy and shift assets that will counter global warming over the long run.
"Climate change and responding to climate change is an important investment opportunity. It's a profitable investment opportunity,'' Michael Sabia said.
Cost of inaction
Mitigating the impact of natural disasters is often painted as a cost of doing business. But Atif Kubursi, professor emeritus of economics at McMaster University in Hamilton, says the investment community is slowly starting to find a balance between the cost of action and the opportunity cost of inaction.
"We tend to present the environment as a major cost, and we have to do it for future generations," he says. "But you can't sell it this way."
He cites the example of Norway as a good model. In 1990, after discovering massive oil fields in the North Sea years earlier, the country set about investing its newfound oil wealth in alternative energy ventures that are now worth more than $1 trillion.
Today, despite being one of the world's biggest producers of crude oil, almost two-thirds of Norway's domestic energy comes from renewable resources.
What may have seemed like a big cost initially has provided significant long-term benefits.
Kubursi contrasts that approach with the thinking of carbon tax opponents, who he says tend to focus on the up-front cost, such as at the pumps, and not the cost of inaction.
"If we don't pay this three or four cents today, we are likely to face much higher costs in the future," he says.
It's a rethink that businesses are starting to come to grips with — "some faster than others," Mandeville says.
"We in the restoration community have been screaming about this for 20 years," he says. "[But] people are finally starting to wake up to it."