Essay by Eric Worrall
Time author Justin Worland is distressed that companies don’t understand alarmist predictions of future climate harms.
OCT 4, 2025 5:00 AM AET
When Will Companies Grasp the Cost of Climate Change?
by Justin Worland
SENIOR CORRESPONDENTFor as long as I can remember, adaptation and resilience have been ugly ducklings of sorts in the broader climate conversation. To many climate advocates, focusing too much on measures to prepare society for the physical costs of climate change risked distracting from efforts to cut emissions. For businesses, assessing the actual costs of climate change was too difficult to measure and the damages seemed too far out.
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“When we’re talking to our investment team, we sort of assume physical climate risk is already mispriced,” said Jamie Franco, the head of cross-asset research and sustainable investment at TCW Group, an asset manager, on a Climate Week panel held by MSCI. “It’s already in your portfolio. You’re sort of flying blind. You have to combine some of the data you have, which is imperfect, and think about it from the asset that you’re investing in.”
For companies, there’s no easy fix. First, addressing the issue requires future-oriented data and modeling that can clearly show where the risk lies. Even more difficult is gathering the institutional will to use a company’s limited capital on resilience efforts that pay off in future cost savings rather than the more immediate returns of big financial growth-oriented investments. But pressure to do so will come soon enough. As the costs continue to stack up, companies will feel increasing pressure from investors and other stakeholders to take the resilience challenge seriously. Companies that prepare ahead of time will be rewarded; those that don’t risk being forced to change only once the crisis gets to a breaking point.
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Read more: https://time.com/7323198/companies-climate-cost-risk-adaptation/
If companies haven’t noticed the problem, chances are the problem, if any, is so small it is not even registering in the deep analysis large companies continuously perform to monitor the state of their business.
Anyone who has seen the churn on supermarket shelves has witnessed first hand the kind of tight control large companies maintain over costs and profits. Every penny is tracked and accounted for. Every square inch of shelving has to earn its keep. Slow moving or unprofitable product lines are ruthlessly culled – unless they are deemed important lures to bring customers into the shop, in which case they are put up the back, so customers can be tempted by all the useless high profit unhealthy foods supermarkets want you to purchase, while trekking to the back of the store to find the items customers actually need.
If climate change ever negatively impacts profits, large companies will detect it immediately, and respond with precisely calibrated adaptive measures. If they are not making such adjustments, then climate change is not hurting their businesses.
What about the issue of “mispriced risk”? Some climate modellers predict climate change will deliver superstorms, low probability high impact events which would be difficult to correctly price based on historical observations, if they were to suddenly surge in significance.
But to correctly price such risk, you need climate models which work.
Current climate models are unphysical, therefore they are predictively useless. A model which fails to predict critical features of the Earth’s climate cannot be relied upon to make sound predictions about future climate change.
Using current climate models to predict future risk is on a par with using an ouija board. Taking the output of an unphysical model seriously is on a par with consulting a psychic for business advice.
Companies should take resilience seriously. In today’s uncertain world, supply chains could be cut at any moment, and history tells us our world is capable of creating megadroughts and horrific fire and storm events even without climate model voodoo. But to base future decisions on untrustworthy models, climate models or otherwise, is to incur a significant risk of corporate resource misallocation, which in today’s competitive world could be more damaging than suffering the occasional outage because of unexpected storms.
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Which has more science expertise: The staffs of major corporations, or Eric Worrall?
Stop wondering about them!
What makes you think the “staffs of major corporations” have any science expertise?
Staffs of majority corporations are hired first for the business acumen, and then for their knowledge/skills in certain technologies that are important to the corporation.
Over the years, Eric has proven his understanding of this issue. You on the other hand have only demonstrated that you are willing to pontificate regarding things you obviously know nothing about.
Ummmm . . . Time magazine . . . isn’t that the rag that had Greta Thunberg as its “Person of the Year” back in 2019 or so? Talk about a fade-out . . . last I heard Greta has just been deported from Israel after being arrested there.
And this news for Time author Justin Worland who is quoted in the above article: don’t be distressed that companies don’t understand alarmist predictions of future climate harms. To the contrary, they fully understand those predictions but, with reason, totally ignore them.
Some companies have been pretending that they’re taking steps to address climate change by publicizing their supposed actions when in fact these are just part of their sales pitch, and they’re actually doing little or nothing more than those that are honest about the issue. But if consumers don’t bother to examine these so-called actions, they’re the ones that will be paying the higher prices, while the various vendors will be earning undeserved profits. So it’s the old case of buyer beware and don’t pay for something that either isn’t occurring or isn’t making any difference anyway.
Groove Tube:
“After 2 years and $2 million, we’ve come up with this advertising campaign.”
When I read about assessing future climate risks I can’t help but think about how Judith Curry answered a similar question 10 years ago. She said we haven’t put the policies, infrastructure and building codes in place to handle the risks of the past.
Think of some of the disasters just this year. California houses in fire zones are not built to be nonflammable, shrubs and brush next to houses, overhead power lines not deactivated because sensors said a wind threshold had not been reached. (And why aren’t they built to higher wind standards or buried in fire zones.)
In Texas, living quarters built in known flash flood planes. Houses falling into the sea in North Carolina on barrier islands because there is a hurricane 200 miles offshore.
For all the futile effort to change the weather in 2100, perhaps some proper civil engineering, building codes, proper zoning, and building an electrical grid to handle the weather we already have should become a priority.
Generally reasonable article but I’m tired of the “In today’s uncertain world” meme…when has the world been more certain? The only ‘uncertainty’ is how long it will take to throw off the stupidity of the climate cartel and reinvest in reality.
Instead of wasting trillions on unreliable, useless, expensive, dirty energy schemes it should have been invested in helping make Africa an industrial power. They have tremendous assets being wasted. China wouldn’t be an economic super power, and supply chains could be made redundant…
“Some climate modellers predict climate change will deliver superstorms, low probability high impact events which would be difficult to correctly price based on historical observations, if they were to suddenly surge in significance.”
But isn’t this what insurance is for – low probability, high impact events? And hasn’t Warren Buffett dismissed any worry about the future costs (if any) outright?
” It’s understandable that the sponsor of the proxy proposal believes Berkshire is especially threatened by climate change because we are a huge insurer, covering all sorts of risks. The sponsor may worry that property losses will skyrocket because of weather changes. And such worries might, in fact, be warranted if we wrote ten- or twenty-year policies at fixed prices. But insurance policies are customarily written for one year and repriced annually to reflect changing exposures. Increased possibilities of loss translate promptly into increased premiums.”
” Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather- related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.
As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries. …”
From a Letter to Shareholders…
Source: https://www.berkshirehathaway.com/letters/2015ltr.pdf
Most important points NOT discussed here :
1) Time value of money – the further out in time any potential impact is , the lower the present value of said impact is. This is basic economics. Given the potential time lines of any “climate impacts” (far in the future), the present value is negligible, thus why investments in said risks are also negligible. No surprise (except to those who don’t understand economics).
2) Risked-weighted decision making – Take the above & then multiply by the “”chance of occurrence ” to get what a company should actually be investing. The data (looked at objectively or even anecdotally) says catastrophic risks have a low chance of occurring.
So – events that may or may not happen a long time in the future basically merit no present investment. And that is what we are seeing from sensible companies. That is economics – something that Justin Worland clearly doesn’t understand (either that or he think climate impacts are imminent & high chance of occurrence – in which case I say, please provide the data to us to support this position).