As climate change continues to escalate, businesses and governments are increasingly pressed to accurately assess its financial ramifications. Experts are emphasizing the urgent need for a standardized model to quantify the impacts of climate events, such as storms, floods, and droughts, on various industries.
In an interview, Paresh Narayan, the President of the Academic and Asia-Pacific and Applied Economics Association (APAEA), stressed the importance of a measurement model. He noted that such a model would enable businesses to evaluate both direct and indirect costs, secure insurance coverage, and access climate financing effectively.
Narayan pointed out that measuring the destructive impacts of climate change presents complexities that differ significantly from assessing physical damage to infrastructure. He remarked, “The model of how you measure this damage is different because there’s no one model and this depends on what it’s going to affect, including housing and businesses alike.” This is particularly critical for sectors like tourism and manufacturing, which may experience direct losses and operational disruptions due to climate-related events.
He highlighted that without a reliable methodology, businesses would struggle to claim insurance or seek funds for climate resilience. “The verification process, essential for credible reporting, requires accountants and auditors to confirm that the reported damage is neither overstated nor underestimated,” he added, emphasizing the crucial role that accountants play in any business context.
The APAEA is committed to collaborating on the development of a functional model during regional discussions, including a roundtable planned with the Asian Development Bank (ADB). This initiative aims to equip businesses and governments with tools to better manage and mitigate the financial risks associated with climate change in the region. Narayan’s conclusion is clear: “Without accurate measurements, recovery from climate events will remain a challenge for businesses and nations alike.”
In summary, as the world grapples with the consequences of climate change, establishing robust metrics to evaluate its economic implications is more important than ever. This proactive approach could not only enhance recovery efforts but also foster resilience and sustainability within vulnerable sectors. The cooperative efforts among experts, governments, and financial institutions may pave the way for stronger climate adaptation strategies in the future.
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