LONDON, Feb. 8 (Reuters) – Misuse of climate models could pose a growing risk to financial markets by giving investors a false sense of certainty about the physical consequences of climate change, according to the authors of an article published on Monday . .
With heat waves, veld fires, massive storms and sea level rises expected to increase as the planet warms, businesses are under increasing pressure to announce how the disruption could affect their businesses.
But the authors of a peer-reviewed article here in Nature Climate Change warned that the quest to integrate global warming into financial decision-making has made the models used to simulate the climate jump by a minimum of ten years.
“Just as a Formula One Grand Prix car is not what you would use to jump into the supermarket, climate models were never developed to provide fine information for financial risks,” said Andy Pitman, a climate scientist. to the University of New, said. South Wales and a co-author of the paper.
Improper use of climate models can lead to unintended consequences, such as “greenwashing” some investments by reducing risks, or impairing the ability of businesses to obtain debt by exaggerating others, the authors said.
The problem is that existing climate models have been developed to predict temperature changes over many decades, on a global or continental scale, while investors generally require short-term analysis over much shorter time frames.
Climate models are also not designed to simulate extreme weather conditions such as storms that can cause sudden financial losses.
To bridge the gap, the authors called for the development of new forms of climate projection to support the financial sector, supported by ‘climate translators’ who are qualified to help regulators, investors and businesses make better use of science.
“Businesses like to use models because the numbers give them a sense of security,” said Tanya Fiedler, a lecturer at the University of Sydney and lead author of the article. “That does not necessarily mean that the numbers are reliable.” (Reporting by Matthew Green; Editing by Hugh Lawson)