Stuart Kirk, HSBC Asset Management's head of responsible investment, has been catching a lot of flak for comments he made yesterday expressing his view that the risk to financial markets from climate change is overstated. "Who cares if Miami is six meters underwater in 100 years?" he reportedly said. "Amsterdam has been six meters underwater for ages and that is a really nice place. We will cope with it." Of course, one difference between Miami and Amsterdam is lead time–the dike system in the Netherlands that prevents flooding has its origins in the Iron Age, and although the construction we see today really started moving in the 12th century, that's still 900 years worth of engineering we're talking about.
Kirk's presentation, which you can watch for yourself here, was entitled "Why investors need not worry about climate risk." And while Kirk acknowledged the risk of climate change he said he found the focus on climate "disproportionate" compared to more pressing concerns like inflation, noting that "at a big bank like ours, what do people think the average loan length is? It is six years. What happens to the planet in year seven is actually irrelevant to our loan book."
But what truly caught my ear about his comments was something he said I was sympathetic to: "there's always been some nutjob telling me about the end of the world." I can relate. I get emails in my inbox all the time like that. But then he proceeded to reference the Y2K bug as a problem that never happened. But here's the thing about the Y2K bug, if the folks reading this newsletter are old enough to remember it: one of the reasons why the crisis didn't happen is because there were hundreds of billions of dollars spent by governments and industry for years to avoid the problem in the first place. In that case, the end of the world was averted thanks to more than a decade of preparation. The folks involved did their jobs so well that Y2K has become a punchline, which creates something of a paradox for crisis management, doesn't it? If you foresee a problem well in advance and persuade people to help you prevent the problem from occurring, success means others will look back and claim there was never a problem in the first place. |
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