As the impacts of climate change become increasingly severe, both businesses and governments are under growing pressure to effectively assess its financial repercussions. Experts are now advocating for the urgent establishment of a standardized model to measure the effects of climate events—such as storms, floods, and droughts—on various sectors.
In a recent interview, Paresh Narayan, the President of the Academic and Asia-Pacific and Applied Economics Association (APAEA), emphasized that creating such a measurement model is vital. It would provide businesses with the ability to gauge both direct and indirect costs, secure necessary insurance, and tap into climate financing resources.
Narayan pointed out that measuring climate-related damage differs significantly from assessing physical infrastructure damage. He elaborated, “The model of how you measure this damage is different because there’s no one model. It varies based on what is affected, including housing and businesses.” He particularly highlighted that sectors such as tourism and manufacturing are vulnerable to direct losses and operational interruptions due to these climate events.
A reliable assessment methodology is essential, as it influences businesses’ capabilities in claiming insurance or applying for climate resilience funding. Narayan remarked on the crucial role of accountants and auditors in the verification process, which is necessary for credible reporting. They ensure that reported damages are accurately portrayed, avoiding scenarios where impacts are overstated or underestimated.
The APAEA is committed to engaging in regional discussions to develop a functional model, with a planned roundtable collaboration with the Asian Development Bank (ADB) aimed at creating tools that can assist businesses and governments in managing and mitigating financial risks arising from climate change.
The overarching aim of these efforts is evident: accurate measurement is key to overcoming the challenges posed by climate events, enabling both businesses and nations to recover effectively.
In a hopeful light, this collaborative approach holds promise for fostering resilience against climate change, paving the way for more sustainable business practices and enhanced preparation for future climate-related challenges. By prioritizing the development of standardized measurement models, stakeholders are taking critical steps toward a more adaptive and robust economic framework in the face of climate adversity.
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