Scientists warn over misuse of climate models in financial markets

By Matthew Green LONDON (Reuters) - Misuse of climate models could pose a growing risk to financial markets by giving investors a false sense of certainty over how the physical impacts of climate change will play out, according to the authors of a paper published on Monday. With heatwaves, wildfires, massive storms and sea-level rises projected to intensify as the planet warms, companies are under growing pressure to disclose how the disruption could affect their businesses. But the authors of a peer-reviewed article in Nature Climate Change warned that the drive to integrate global warming into financial decision-making had leap-frogged the models used to simulate the climate by 'at least a decade'.

Reuters February 09, 2021 00:06:40 IST
Scientists warn over misuse of climate models in financial markets

Scientists warn over misuse of climate models in financial markets

By Matthew Green

LONDON (Reuters) - Misuse of climate models could pose a growing risk to financial markets by giving investors a false sense of certainty over how the physical impacts of climate change will play out, according to the authors of a paper published on Monday.

With heatwaves, wildfires, massive storms and sea-level rises projected to intensify as the planet warms, companies are under growing pressure to disclose how the disruption could affect their businesses.

But the authors of a peer-reviewed article in Nature Climate Change warned that the drive to integrate global warming into financial decision-making had leap-frogged the models used to simulate the climate by "at least a decade".

"In the same way that a Formula One Grand Prix car is not what you would use to pop to the supermarket, climate models were never developed to provide finessed information for financial risk," said Andy Pitman, a climate scientist at the University of New South Wales and a co-author of the paper.

Improper use of climate models could lead to unintended consequences, such as "greenwashing" some investments by downplaying risks, or hitting the ability of companies to raise debt by exaggerating others, the authors said.

The problem is that existing climate models have been developed to predict temperature changes over many decades, at global or continental scales, whereas investors generally need location-specific analysis on much shorter timeframes.

Neither are climate models designed to simulate extreme weather events, such as storms, which can cause sudden financial losses.

To bridge the gap, the authors called for the development of new forms of climate projection to support the financial sector, backed by "climate translators" qualified to help regulators, investors and companies make better use of the science.

"Businesses like using models, because the numbers give them a sense of security," said Tanya Fiedler, a lecturer at the University of Sydney and lead author of the paper. "It doesn't necessarily mean the numbers are reliable."

(Reporting by Matthew Green; Editing by Hugh Lawson)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.