Initial Risk-Mitigating Strategies for Weathering Environmental and Climate-Change Impacts on U.S. Companies

Abstract

Framing climate change as an economic risk has, in the last several years, galvanized investor and regulatory attention, as well as a small cadre of influential business and financial leaders. Initial, risk mitigating strategies for U.S. companies concerned with the potentially-harsh environmental and climate-change impacts include: identifying company vulnerabilities to extensive and expansive environmental changes, implementing requisite changes in operations and infrastructure investments to weather these impacts, substituting renewable energy sources like wind and solar, and buying insurance and other long-term, risk-management financial contracts to guard against potentially catastrophic losses.

Keywords: climate warming, risk management, derivatives, economic risk, green bonds, sustainable investments, carbon emissions, stranded assets, fossil fuels, carbon tax.

JEL Classification: D81, G12, G22, G23, G24, L21