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Harvey’s Message to Business: Climate Change is a Material Risk Now.

Welcome to the Centric Law blog, where I hope to bring you thoughts, news and analysis related to climate change, the law and issues related to our mission. This inaugural blog, written at the end of August 2017, couldn’t be more timely: as I write this, the floodwaters in and around Houston are at historic highs and the country is feeling the impact of the disaster on multiple levels. Yet, as bad as it is, there’s something strangely familiar about Harvey, and in fact even predictable. The message it sends to the business sector, government and the public couldn’t be clearer. Harvey has pounded on our door with its soggy fist and announced: “Hello, my name is climate change. I’m here to take your money and make your life miserable.”

That Hurricane Harvey is linked to climate change is beyond any scientific doubt. Michael E. Mann, perhaps the preeminent climate scientist in America, explained the linkage in a Facebook post on August 27, pointing out what scientists and meteorologists have been repeating a lot this week: climate change didn’t “cause” the disaster, but it certainly made it worse. A deadly cocktail of SLR (sea level rise), warmer water temperatures in the Gulf of Mexico and altered wind patterns—which failed to deflect Harvey from striking the Texas coast dead-on—are all climate change factors that spiked what otherwise might be considered a “natural” disaster into a catastrophe with significant human fingerprints. In this way Harvey is very similar to other recent hurricane disasters, such as Sandy in 2012, which generated the same sort of public discussion that we’re seeing now about the degree to which human activity has sharpened the blades of natural weapons aimed at our communities, our businesses and our livelihoods.

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Furthermore, Harvey demonstrates the relationship of law and policy to climate change. Houston’s built environment, shaped directly by law and policy decisions, made it especially vulnerable to hurricane and storm impacts. There is no zoning in Houston, the land-use regulatory environment is weak to nonexistent, and runaway sprawl driven by unrestrained market forces have, since World War II, been busy building Houston into a metaphorical Tokyo simply waiting for an epic trampling by a storm-related Godzilla. In this sense I’m reluctant to refer to Hurricane Harvey as a “natural” disaster at all. Environmental historian Theodore Steinberg, in his seminal book Acts of God: The Unnatural History of Natural Disaster in America, written right after Hurricane Katrina (which Harvey eerily resembles), argues that disasters of this kind are much more man-made than not. No one creates a tornado, but humans certainly built the trailer parks that tornadoes seem especially attracted to, and market forces ensure that the people who live there are the least equipped to handle storm-related disasters. We ignore our complicity in such disasters at our peril.
As bad as it is, Harvey is a “teachable moment,” especially for the business sector. The monetary bill that Harvey has handed our society is estimated, at this early stage, at perhaps $24 billion, which includes insurance losses, infrastructure repair and the impact on the labor force. The economic output of the South Texas region is expected to shrink by $1 billion according to Moody’s Analytics. I’ve read that, as of now, every real estate deal in Houston is on hold indefinitely. While not minimizing the dreadful human cost to those who lost their homes, and in some cases their lives, to the floodwaters, let’s consider a more indirect impact. What if you were an investor doing a 1031 like-kind exchange for property in the Houston area, and Harvey-related impacts gut the value of your replacement property on day 176 of your exchange period? If you’re in that situation, climate change has just created a legal and financial problem that you will need creative advisors to get you out of. In this light it’s rather hard to visualize climate change in terms of clichéd images of doleful polar bears clinging to shrinking icebergs, isn’t it?

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For those of us who work in fields related to climate change, one of the biggest challenges is making the case, especially in the business and financial sectors, that climate change is a material business risk now—not in the year 2100 when temperatures are several degrees hotter than they are now, not 15, 10 or even 5 years from now, but today. Climate change is not something happening up there in the Arctic or on a high floor of the United Nations building or in an alarming graph on a climatologist’s computer. It’s in your insurance adjuster’s in-box, in your broker’s financial projections and, quite possibly, lurking on your own balance sheet, right now, today. Events like Hurricane Harvey are tragic and heartbreaking, but they do make the case, quite dramatically, that climate change is a present material business risk. The question is, how many more lessons like Harvey do we need to be taught before the point really sinks in.