As climate change continues to escalate, both businesses and governments are under increasing pressure to accurately assess its financial consequences. Experts emphasize the urgent need for a standardized model that quantifies the impacts of climate events such as storms, floods, and droughts on businesses.
Paresh Narayan, President of the Academic and Asia-Pacific Applied Economics Association (APAEA), shared insights during an interview, highlighting the importance of such a measurement model. This framework would allow businesses to evaluate both direct and indirect costs, obtain insurance coverage, and secure climate-related financing.
Mr. Narayan noted that assessing the destruction caused by climate change is fundamentally different from accounting for physical damage to infrastructure. “The model for measuring this damage varies greatly, depending on the specific impacts on different sectors, including housing and businesses,” he explained. He pointed out that industries like tourism and manufacturing are particularly vulnerable, facing direct losses and operational interruptions.
He warned that without a reliable methodology, businesses could struggle to file insurance claims or seek climate resilience funding. “The verification process, critical for accurate reporting, relies on accountants and auditors to ensure that the reported damages are not exaggerated or understated,” he added, emphasizing the vital role of accountants in this context.
The APAEA aims to contribute to the development of a functional model through regional discussions, including a planned roundtable with the Asian Development Bank (ADB). This initiative seeks to promote tools that will assist businesses and governments in effectively navigating and mitigating the financial risks posed by climate change.
“The objective is clear: accurate measurements are essential for overcoming challenges in recovering from climate events for both businesses and nations,” Mr. Narayan concluded.
Comment: Developing a standardized measurement model for climate change impacts could lead to better preparedness and resilience for businesses. This initiative offers hope, as it aligns with global efforts to tackle climate challenges, ensuring both economic stability and environmental sustainability.
Summary: With the intensification of climate change, experts emphasize the need for a standardized model to measure its financial impacts on businesses. Paresh Narayan from the APAEA stresses the importance of accurate assessments for securing insurance and funding, highlighting the unique challenges in quantifying climate-related damage. Collaborative efforts, including discussions with the ADB, aim to create effective tools for managing climate risks.
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