Climate Risk And Response - Global Management Consulting
Climate riskand responsePhysical hazards and socioeconomic impactsJanuary 2020
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Climate riskand responsePhysical hazards and socioeconomic impactsJanuary 2020AuthorsJonathan Woetzel, ShanghaiDickon Pinner, San FranciscoHamid Samandari, New YorkHauke Engel, FrankfurtMekala Krishnan, BostonBrodie Boland, Washington, DCCarter Powis, Toronto
PrefaceMcKinsey has long focused on issues of environmental sustainability, dating to client studiesin the early 1970s. We developed our global greenhouse gas abatement cost curve in 2007,updated it in 2009, and have since conducted national abatement studies in countriesincluding Brazil, China, Germany, India, Russia, Sweden, the United Kingdom, and the UnitedStates. Recent publications include Shaping climate-resilient development: A framework fordecision-making (jointly released with the Economics of Climate Adaptation Working Groupin 2009), Towards the Circular Economy (joint publication with Ellen MacArthur Foundationin 2013), An integrated perspective on the future of mobility (2016), and Decarbonizationof industrial sectors: The next frontier (2018). The McKinsey Global Institute has likewisepublished reports on sustainability topics including Resource revolution: Meeting the world’senergy, materials, food, and water needs (2011) and Beyond the supercycle: How technologyis reshaping resources (2017).In this report, we look at the physical effects of our changing climate. We explore risks todayand over the next three decades and examine cases to understand the mechanisms throughwhich physical climate change leads to increased socioeconomic risk. We also estimate theprobabilities and magnitude of potential impacts. Our aim is to help inform decision makersaround the world so that they can better assess, adapt to, and mitigate the physical risks ofclimate change.This report is the product of a yearlong, cross-disciplinary research effort at McKinsey &Company, led by MGI together with McKinsey’s Sustainability Practice and McKinsey’s RiskPractice. The research was led by Jonathan Woetzel, an MGI director based in Shanghai, andMekala Krishnan, an MGI senior fellow in Boston, together with McKinsey senior partnersDickon Pinner in San Francisco and Hamid Samandari in New York, partner Hauke Engel inFrankfurt, and associate partner Brodie Boland in Washington, DC. The project team was ledby Tilman Melzer, Andrey Mironenko, and Claudia Kampel and consisted of Vassily Carantino,Peter Cooper, Peter De Ford, Jessica Dharmasiri, Jakob Graabak, Ulrike Grassinger, ZealanHoover, Sebastian Kahlert, Dhiraj Kumar, Hannah Murdoch, Karin Östgren, Jemima Peppel,Pauline Pfuderer, Carter Powis, Byron Ruby, Sarah Sargent, Erik Schilling, Anna Stanley,Marlies Vasmel, and Johanna von der Leyen. Brian Cooperman, Eduardo Doryan, Jose MariaQuiros, Vivien Singer, and Sulay Solis provided modeling, analytics, and data support. MichaelBirshan, David Fine, Lutz Goedde, Cindy Levy, James Manyika, Scott Nyquist, Vivek Pandit,Daniel Pacthod, Matt Rogers, Sven Smit, and Thomas Vahlenkamp provided critical input andconsiderable expertise.While McKinsey employs many scientists, including climate scientists, we are not a climateresearch institution. Woods Hole Research Center (WHRC) produced the scientificanalyses of physical climate hazards in this report. WHRC has been focused on climatescience research since 1985; its scientists are widely published in major scientific journals,testify to lawmakers around the world, and are regularly sourced in major media outlets.Methodological design and results were independently reviewed by senior scientists atthe University of Oxford’s Environmental Change Institute to ensure impartiality and testthe scientific foundation for the new analyses in this report. Final design choices andinterpretation of climate hazard results were made by WHRC. In addition, WHRC scientistsproduced maps and data visualization for the report.We would like to thank our academic advisers, who challenged our thinking and addednew insights: Dr. Richard N. Cooper, Maurits C. Boas Professor of International Economicsat Harvard University; Dr. Cameron Hepburn, director of the Economics of SustainabilityiiMcKinsey Global Institute
Programme and professor of environmental economics at the Smith School of Enterprise andthe Environment at Oxford University; and Hans-Helmut Kotz, Program Director, SAFE PolicyCenter, Goethe University Frankfurt, and Resident Fellow, Center for European Studies atHarvard University.We would like to thank our advisory council for sharing their profound knowledge andhelping to shape this report: Fu Chengyu, former chairman of Sinopec; John Haley, CEOof Willis Towers Watson; Xue Lan, former dean of the School of Public Policy at TsinghuaUniversity; Xu Lin, US China Green Energy Fund; and Tracy Wolstencroft, president and chiefexecutive officer of the National Geographic Society. We would also like to thank the Bankof England for discussions and in particular, Sarah Breeden, executive sponsor of the Bankof England’s climate risk work, for taking the time to provide feedback on this report as wellas Laurence Fink, chief executive officer of BlackRock, and Brian Deese, global head ofsustainable investing at BlackRock, for their valuable feedback.Our climate risk working group helped develop and guide our research over the yearand we would like to especially thank: Murray Birt, senior ESG strategist at DWS;Dr. Andrea Castanho, Woods Hole Research Center; Dr. Michael T. Coe, director of the TropicsProgram at Woods Hole Research Center; Rowan Douglas, head of the capital science andpolicy practice at Willis Towers Watson; Dr. Philip B. Duffy, president and executive directorof Woods Hole Research Center; Jonathon Gascoigne, director, risk analytics at Willis TowersWatson; Dr. Spencer Glendon, senior fellow at Woods Hole Research Center; Prasad Gunturi,executive vice president at Willis Re; Jeremy Oppenheim, senior managing partner atSYSTEMIQ; Carlos Sanchez, director, climate resilient finance at Willis Towers Watson;Dr. Christopher R. Schwalm, associate scientist and risk program director at Woods HoleResearch Center; Rich Sorkin, CEO at Jupiter Intelligence; and Dr. Zachary Zobel, projectscientist at Woods Hole Research Center.A number of organizations and individuals generously contributed their time, data, andexpertise. Organizations include AECOM, Arup, Asian Development Bank, Bristol City Council,CIMMYT (International Maize and Wheat Improvement Center), First Street Foundation,International Food Policy Research Institute, Jupiter Intelligence, KatRisk, SYSTEMIQ,Vietnam National University Ho Chi Minh City, Vrije Universiteit Amsterdam, Willis TowersWatson, and World Resources Institute. Individuals who guided us include Dr. Marco Albani ofthe World Economic Forum; Charles Andrews, senior climate expert at the Asian DevelopmentBank; Dr. Channing Arndt, director of the environment and production technology divisionat IFPRI; James Bainbridge, head of facility engineering and management at BBraun;Haydn Belfield, academic project manager at the Centre for the Study of Existential Riskat Cambridge University; Carter Brandon, senior fellow, Global Commission on Adaptationat the World Resources Institute; Dr. Daniel Burillo, utilities engineer at California EnergyCommission; Dr. Jeremy Carew-Reid, director general at ICEM; Dr. Amy Clement, Universityof Miami; Joyce Coffee, founder and president of Climate Resilience Consulting; Chris Corr,chair of the Florida Council of 100; Ann Cousins, head of the Bristol office’s Climate ChangeAdvisory Team at Arup; Kristina Dahl, senior climate scientist at the Union of ConcernedScientists; Dr. James Daniell, disaster risk consultant at CATDAT and Karlsruhe Instituteof Technology; Matthew Eby, founder and executive director at First Street Foundation;Jessica Elengical, ESG Strategy Lead at DWS; Greg Fiske, senior geospatial analyst atWoods Hole Research Center; Susan Gray, global head of sustainable finance, business,and innovation, S&P Global; Jesse Keenan, Harvard University Center for the Environment;Dr. Kindie Tesfaye Fantaye, CIMMYT (International Maize and Wheat Improvement Center);Dr. Xiang Gao, principal research scientist at Massachusetts Institute of Technology;Beth Gibbons, executive director of the American Society of Adaptation Professionals; SirCharles Godfray, professor at Oxford University; Patrick Goodey, head of flood managementin the Bristol City Council; Dr. Luke J. Harrington, Environmental Change Institute at Universityof Oxford; Dr. George Havenith, professor of environmental physiology and ergonomics atLoughborough University; Brian Holtemeyer, research analyst at IFPRI; David Hodson, seniorscientist at CIMMYT; Alex Jennings-Howe, flood risk modeller in the Bristol City Council;Climate risk and response: Physical hazards and socioeconomic impactsiii
Dr. Matthew Kahn, director of the 21st Century Cities Initiative at Johns Hopkins University; Dr.Benjamin Kirtman, director of the Cooperative Institute for Marine and Atmospheric Studiesand director of the Center for Computational Science Climate and Environmental HazardsProgram at the University of Miami; Nisha Krishnan, climate finance associate at the WorldResources Institute, Dr. Michael Lacour-Little, director of economics at Fannie Mae; Dr.Judith Ledlee, project engineer at Black & Veatch; Dag Lohmann, chief executive officer atKatRisk; Ryan Lewis, professor at the Center for Research on Consumer Financial DecisionMaking, University of Colorado Boulder; Dr. Fred Lubnow, director of aquatic programsat Princeton Hydro; Steven McAlpine, head of Data Science at First Street Foundation;Manuel D. Medina, founder and managing partner of Medina Capital; Dr. Ilona Otto, PotsdamInstitute for Climate Impact Research; Kenneth Pearson, head of engineering at BBraun; Dr.Jeremy Porter, Academic Research Partner at First Street Foundation; Dr. Maria Pregnolato,expert on transport system response to flooding at University of Bristol; Jay Roop, deputyhead of Vietnam of the Asian Development Bank; Dr. Rich Ruby, director of technology atBroadcom; Dr. Adam Schlosser, deputy director for science research, Joint Program onthe Science and Policy of Global Change at the Massachusetts Institute of Technology; Dr.Paolo Scussolini, Institute for Environmental Studies at the Vrije Universiteit Amsterdam;Dr. Kathleen Sealey, associate professor at the University of Miami; Timothy Searchinger,research scholar at Princeton University; Dr. Kai Sonder, head of the geographic informationsystem unit at CIMMYT (International Maize and Wheat Improvement Center); Joel Sonkin,director of resiliency at AECOM; John Stevens, flood risk officer in the Bristol City Council; Dr.Thi Van Thu Tran, Viet Nam National University Ho Chi Minh City; Dr. James Thurlow, seniorresearch fellow at IFPRI; Dr. Keith Wiebe, senior research fellow at IFPRI; David Wilkes, globalhead of flooding and former director of Thames Barrier at Arup; Dr. Brian Wright, professor atthe University of California, Berkeley; and Wael Youssef, associate vice president, engineeringdirector at AECOM.Multiple groups within McKinsey contributed their analysis and expertise, includingACRE, McKinsey’s center of excellence for advanced analytics in agriculture; McKinseyCenter for Agricultural Transformation; McKinsey Corporate Performance Analytics;Quantum Black; and MGI Economics Research. Current and former McKinsey and MGIcolleagues provided valuable input including: Knut Alicke, Adriana Aragon, Gassan Al-Kibsi,Gabriel Morgan Asaftei, Andrew Badger, Edward Barriball, Eric Bartels, Jalil Bensouda,Tiago Berni, Urs Binggeli, Sara Boettiger, Duarte Brage, Marco Breu, Katharina Brinck,Sarah Brody, Stefan Burghardt, Luís Cunha, Eoin Daly, Kaushik Das, Bobby Demissie,Nicolas Denis, Anton Derkach, Valerio Dilda, Jonathan Dimson, Thomas Dormann, Andre Dua,Stephan Eibl, Omar El Hamamsy, Travis Fagan, Ignacio Felix, Fernando Ferrari-Haines,David Fiocco, Matthieu Francois, Marcus Frank, Steffen Fuchs, Ian Gleeson, Jose LuisGonzalez, Stephan Gorner, Rajat Gupta, Ziad Haider, Homayoun Hatamai, Hans Helbekkmo,Kimberly Henderson, Liz Hilton Segel, Martin Hirt, Blake Houghton, Kia Javanmardian,Steve John, Connie Jordan, Sean Kane, Vikram Kapur, Joshua Katz, Greg Kelly, Adam Kendall,Can Kendi, Somesh Khanna, Kelly Kolker, Tim Koller, Gautam Kumra, Xavier Lamblin,Hugues Lavandier, Chris Leech, Sebastien Leger, Martin Lehnich, Nick Leung, Alastair Levy,Jason Lu, Jukka Maksimainen, John McCarthy, Ryan McCullough, Erwann Michel-Kerjan,Jean-Christophe Mieszala, Jan Mischke, Hasan Muzaffar, Mihir Mysore, Kerry Naidoo,Subbu Narayanaswamy, Fritz Nauck, Joe Ngai, Jan Tijs Nijssen, Arjun Padmanabhan,Gillian Pais, Guofeng Pan, Jeremy Redenius, Occo Roelofsen, Alejandro Paniagua Rojas,Ron Ritter, Adam Rubin, Sam Samdani, Sunil Sanghvi, Ali Sankur, Grant Schlereth,Michael Schmeink, Joao Segorbe, Ketan Shah, Stuart Shilson, Marcus Sieberer,Halldor Sigurdsson, Pal Erik Sjatil, Kevin Sneader, Dan Stephens, Kurt Strovink,Gernot Strube, Ben Sumers, Humayun Tai, Ozgur Tanrikulu, Marcos Tarnowski, MichaelTecza, Chris Thomas, Oliver Tonby, Chris Toomey, Christer Tryggestad, Andreas Tschiesner,Selin Tunguc, Magnus Tyreman, Roberto Uchoa de Paula, Robert Uhlaner, Soyoko Umeno,Gregory Vainberg, Cornelius Walter, John Warner, Olivia White, Bill Wiseman, andCarter Wood.ivMcKinsey Global Institute
This report was produced by MGI senior editor Anna Bernasek, editorial directorPeter Gumbel, production manager Julie Philpot, designers Marisa Carder, Laura Brown,and Patrick White, and photographic editor Nathan Wilson. We also thank our colleaguesDennis Alexander, Tim Beacom, Nienke Beuwer, Nura Funda, Cathy Gui, Deadra Henderson,Kristen Jennings, Richard Johnson, Karen P. Jones, Simon London, Lauren Meling,Rebeca Robboy, and Josh Rosenfield for their contributions and support.As with all MGI research, this work is independent, reflects our own views, and has not beencommissioned by any business, government, or other institution. We welcome your commentson the research at MGI@mckinsey.com.James ManyikaCo-chairman and director, McKinsey Global InstituteSenior partner, McKinsey & CompanySan FranciscoSven SmitCo-chairman and director, McKinsey Global InstituteSenior partner, McKinsey & CompanyAmsterdamJonathan WoetzelDirector, McKinsey Global InstituteSenior partner, McKinsey & CompanyShanghaiJanuary 2020Climate risk and response: Physical hazards and socioeconomic impactsv
Surface melt on Arctic sea ice. Colin Monteath/Hedgehog House/Minden Pictures/National Geographic
ContentsIn briefExecutive summaryviii11. Understanding physical climate risk392. A changing climate and resulting physical risk493. Physical climate risk—a micro view614. Physical climate risk—a macro view895. An effective response113Glossary of terms121Technical appendix123Bibliography141Climate risk and response: Physical hazards and socioeconomic impactsvii
In briefClimate risk and response:Physical hazards and socioeconomic impactsAfter more than 10,000 years ofrelative stability—the full span of humancivilization—the Earth’s climate ischanging. As average temperatures rise,acute hazards such as heat waves andfloods grow in frequency and severity,and chronic hazards, such as droughtand rising sea levels, intensify. Here wefocus on understanding the nature andextent of physical risk from a changin
on which to base management and policy decisions. MGI research combines the disciplines of economics and management, employing . , An integrated perspective on the future of mobility (2016), and Decarbonization of industrial . Vivien Singer, and Sulay Solis provided modeling, analytics, and data support. Michael Birshan, David Fine, Lutz .
Global warming is when Earth’s air and the water get warmer. Global warming is one part of climate change. This does not sound good! Climate Change in American Samoa You may have heard people talk about Climate Change or Global Warming. Do you know what these are? Uh-oh! 5 Fill in the blank spaces with words from the word bank: Climate change affects the climate of the entire _. Climate .
Risk Matrix 15 Risk Assessment Feature 32 Customize the Risk Matrix 34 Chapter 5: Reference 43 General Reference 44 Family Field Descriptions 60 ii Risk Matrix. Chapter 1: Overview1. Overview of the Risk Matrix Module2. Chapter 2: Risk and Risk Assessment3. About Risk and Risk Assessment4. Specify Risk Values to Determine an Overall Risk Rank5
'climate value at risk' (climate VaR) of global financial assets today is 1.8% along a business-as-usual emissions path. Taking a representative estimate of global financial assets, this amounts to US 2.5 trillion. However, much of the risk is in the tail. For example, the 99th percentile climate VaR is 16.9%, or US 24.2 trillion.
The B.C. climate risk assessment framework includes four key steps to determine priority climate risk events in the province, shown in Figure 3. Figure 3. B.C. climate risk assessment framework overview. 2.1 Step 1: Understand the context For any risk assessment, the first step is to establish the context—such as goals, objectives,
Risk is the effect of uncertainty on objectives (e.g. the objectives of an event). Risk management Risk management is the process of identifying hazards and controlling risks. The risk management process involves four main steps: 1. risk assessment; 2. risk control and risk rating; 3. risk transfer; and 4. risk review. Risk assessment
the international climate agenda or high level thematic meetings: COP26 - Virtual Climate Summit - EU Green Week - African Climate Week, etc. OBSERVATORY 1 Global Synthesis Report on climate action by sector, 4th edition, editorial overhaul 1 Global Synthesis Report on local climate action 3rd edition, new themes, and case study 7 new case studies
Climate Connections. Climate Change en español. Frequent Questions Energy and the Environment Climate and Energy Resources for State, Local, and Tribal Governments Facility Greenhouse Gas Emissions Data Climate and Transportation Climate and Water EPA Climate Change Research Contact Us. to ask a question, provide feedback, or report a problem .
Food Security and Nutrition 1.1.Climate Change and Agriculture Climate change shows in different transformations of climate variables that are causing significant economic, social and environmental effects. The Intergovernmental Panel on Climate Change (IPCC), in 2002, has defined climate change as “any change in climate over time,
