Infrastructure investors failing to address climate change

25 July 2013

Some global infrastructure investors are still failing to consider the impact of climate change on their infrastructure assets, leaving major developments exposed to the increased long-term risks posed by changing environmental conditions, according to a report by Marsh.

The company – which is an insurance broker and a corporate partner of the United Nations International Strategy for Disaster Reduction – said the sustainability of infrastructure assets should be assessed at the project inception stage and throughout the asset’s lifecycle.

But it said many investors, particularly those operating in sectors or geographies still largely unaffected by severe weather or environmental pollution, have yet to build climate change into their risk models.

Marsh environmental practice leader for Europe, the Middle East and Africa, Dr Cliff Warman, said, “The physical damage to property assets and infrastructure as a result of severe weather events such as storms, floods and droughts globally is having a direct impact on society and business, particularly in more fragile and developing economies.

“While some infrastructure investors are starting to take environmental risk criteria into account when undertaking project appraisals, there is a prevailing lack of urgency among firms that have yet to be affected by the changing climate and extreme weather.”

Methods of managing the risks associated with climate change more effectively include wider due diligence and more effective management of extreme weather risks in a long-term economically sustainable form between the public and private sectors.

The report comes amid a torrid period for climate-related natural catastrophes, with major events in the last 12 months including Hurricane Sandy that struck the East Coast last autumn, causing an estimated US$ 20 billion in economic damage, as well as multiple high-strength tornadoes that flattened towns in the US, and wide-spread flooding causing severe damage across central Europe and Asia.

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