Owners of land, houses, apartments and other residential buildings will face a loss that could reach 25 trillion dollars – that is, 25 million million – globally. This exorbitant number, published by The Economist, is comparable to the gross domestic product of the United States. The alarm begins when the fact becomes visible that land, buildings, houses and other real estate assets are among the assets most purchased using borrowed money. Much of the global credit market is collateralized by real estate. Until now this has been the case and it has worked. But what happens if the value of the real estate asset backing the mortgage drops precipitously? Well, there would be shock most destabilizing the world economy has ever experienced. And what force could produce such an impact? Climate change.
The effects of the climate crisis, many of them never seen before, have become routine. Not a week goes by without news of devastating climate events reaching us from the most varied places on the planet. With equal frequency we receive reports supported by the best scientific knowledge available about the speed, magnitude and consequences of changes in the climate.
The reactions to confront the impacts of the climate crisis are being slow, insufficient and uncoordinated. Worse still, in many cases effective responses fail to attract the attention of those who could help change things.
I was recently invited to give a talk to a group of real estate agents in Miami. I asked them if their clients interested in buying real estate in that area were concerned about the possibility that their expensive properties would be affected by climate change. None of those present indicated that this was the case. This is just an anecdote, but it illustrates the situation well.
The disconnect between what science tells us the impact of climate change will be and the decisions that are made about it is one of the main sources of systemic risk in the global economy. The markets simply do not accept risks that are not in doubt for science. This can only end badly.
In Miami, climate risk is not theoretical. In a city where many of the tall skyscrapers have garages built in deep basements, it has become common to see the consequences of the permanent infiltration of water from a rising sea. One would think that would give rise to reflection, but it seems not to be the case.
And Miami is just a microcosm of a global evil. The 11 million inhabitants of Jakarta, the capital of Indonesia, are facing an unprecedented crisis, as their coastal city is sinking under its own weight at the same time that sea levels are rising, forcing the Government to build a very expensive new capital on the island of Borneo. And it is a pattern that is repeated in all geographies: Osaka, Chicago, Calcutta, Rio de Janeiro, Lagos and Dhaka, the capital of Bangladesh, are just some of the large cities that face catastrophic damage in the coming decades as a consequence of the new climate.
In New York, infrastructure designed for a climate different from the one that will exist can hardly adapt to a climate where not only the sea level rises, but storms become more frequent and destructive. In London the problem is the other way around: in this city famous for its fog and rain, it no longer rains like before, and the drought causes the clay on which it is built to settle, causing structural damage to thousands of houses and buildings in London. the British capital.
What we see is a miniscule part of the economic damage that climate change will cause in the coming decades. And there is no turning back: much of the global warming that will be felt in the coming decades will be what climatologists call “committed warming”, that is, it will be caused by carbon dioxide emissions that have already taken place, but whose effect takes time. several decades to make itself fully felt.
It is not, therefore, a matter of goodism, of wanting to be green to feel more virtuous. The point is that climate change is becoming a systemic risk for the well-being of each of the planet’s inhabitants.
We know this. And we have known it for a long time. But… it is difficult for us to react accordingly! When even Miami real estate agents don’t really realize the mess we’re in, we see that there is a lot, a lot of work to do to adapt to the hostile climate system that we ourselves have created.
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