2014/07/16 Council Agenda Packet

UNDERSTANDING CLIMATE RISK • ‘,‘,..i..4..:111111111111111111111.:1;, . 1 know a lot about finoncioi" riskspct, t Tent neuriv my whole col eer inotio,;.-7mq tISAS (S/L with fin(ncicti (T.S15. Tbdat/ 5E'e another type of crisis looming: A dirricile crisis, And while not finiol Hoture, threatens' our econorny just the Risky Business 1' oject CChair Henry Paufton n order to know how to best respond to ciimate change, we first need to fully understand the risks it presents, This is our core principle. As Risky Business Project Co -- Chair Michael Bloomberg observes, "If ,you can't measure it, you can't manage Assessing and managing risk is how busineSSeS, mili- taries and governments are able to remain productive and successful in an increasingly complex, volatile, and unprediaable global economy. DEFINING RISK The risk of a future event can be described as the probabiii t y (or likelihood) of thtft event•combined with the stmetity of Its consequences. The combina- tion of likelihood and severity determines whether a risk is high or low. For iristance, highly likely event with minimal consequenceMvould register , as a moderate risk; a low probability event, if it has potentially catastrophic impacts, totild constitute a significant risk. These low-probability/high-impact risks are generally referred to as "tail risks." The Risky Business assessment evaluates a range of economic risks presented by climate change in the U.S., including both those outcomes considered most likely to occur and lower probability climate futures that wotdd be either considtirably better or considerably worse than the likely range. This is a common risk assessment approach in other areas with potentially catastrophic outcomes, including di- saster management, public health, defense planning, and temorism prevention. in presenting our results we use the tem unkeir to describe outcomes with at least a $7/4 (or 2-in-3) chance of attuning. in discussing tail risks, we gen- erally describe resuks as having a 14e-20 chance (or 5%) of being worse than (or better thanYa particular threshold. Where the science allows it, we also d scrbe 1-fo400 outcomes, or those witlfa 'Ili chance of occurring • ' • " """" • • ••••••• •••••••••••• • • .. • . „:iv • 111,41:444v ...44411, ‘, • „ „ . • .