Wilful blindness: How to debias perceptions and address climate risk now
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Although the world's attention is squarely focused on managing the devastating human and economic consequences of the ongoing COVID pandemic, it serves as a stark reminder to avoid further delay on climate risk action. Unlike the pandemic, there will be no vaccine for full blown ecological collapse brought upon by unmitigated global warming. Historical observations of global surface temperature, as well as advances in climate science including projections from the IPCC (possibly the world’s largest consensus amongst scientists from various relevant fields) clearly show that we are on the path for catastrophic climate change exceeding 2°C unless concerted and drastic actions are taken as soon as possible.
Cause of biases
Research from the Wharton Risk Center has shown that biases hinder optimal decision-making on tail risk events an individual has not personally experienced or which has occurred in the distant past. The following are resulting attitudes towards climate risk:
Improving risk communication and working around the biases
Re-framing the climate discussion will be key to achieve improved buy in for both climate denialists and optimists alike. While incentivizing broad swaths of staunch climate denialists to be genuinely convicted to address climate change is desirable, a more realistic outcome would be to first make these communities feel assured that tackling the climate crisis does not have to come at the expense of cherished personal liberties, and could co-exist with their value systems.
A natural starting point for corporates
The start of the journey of climate risk engagement can seem daunting due to the breadth and complexity of the challenge. However, firms should not wait for regulators to dictate their climate risk strategy as there is inherent business value in forming their own approach, of which meeting regulatory disclosure requirements is one of many other benefits.
While conventional frameworks generally stipulate three categories of climate risk – i.e. physical, transition and liability risk – a natural starting point ought to be physical climate risk assessment because it is only through an improved understanding of physical risk can one then have a meaningful view on when, for example, climate change impacts may get critical enough for governments to impose sudden stringent carbon taxes or force abrupt adverse changes to polluting sectors.
Originally published in the RMIA Digital Magazine in December 2020