Lloyd's Report Urges Planning For Climate Change

The report is a collaboration of Lloyd's 360 Risk Insight and the International Institute of Strategic Studies (IISS).

Four key issues–water scarcity, food supply, energy and natural resource security, and demographic pressures–are outlined in the report with possible resulting scenarios and global threats.

The study also suggests ways to mitigate or lessen the threats of these pressures.

Mr. Ward noted that climate change has never been "far from the headlines," despite the "worst financial and economic turmoil in memory." He added that the enthusiasm of a new U.S. regime means the topic is now "moving back up the global agenda."

Nigel Inkster, director of transnational threats and political risk with the IISS and an author of the report, said during a teleconference today that climate change is increasingly being seen as a "hard security issue," hence the involvement of his company.

He stressed that the report outlines possible scenarios but does not make predictions about the future.

The global threats begin with water, because it is the basis for life. Within a warmer world, Mr. Inkster explained, "we'll actually have more rainfall, but its distribution and frequency will become more uncertain."

Some tropical and semitropical areas that sustain high population levels, he said, will in the future suffer water stress and water insufficiency, impacting agricultural production and food supplies. Mr. Inkster pointed out that currently, 70 percent of the water use on the planet is for agriculture.

That water, he added, is being used wastefully. "It's often not charged at an economic rate and current irrigation techniques are vulnerable to high levels of condensation and ground seepage. So there is an urgent need to develop more efficient agricultural techniques for the use of water." The same is true for industrial production techniques, he added.

A point worth highlighting, he said, is the speed at which some major industrial countries, notably China, are starting to look at response to climate change. Mr. Inkster remarked that they are seeing development of new technologies as an opportunity rather than a threat.

He said that while there may not be total agreement on specific commitments to emission reductions, this is an important area for discussion at the upcoming Copenhagen Climate Conference 2009 in December.

The role of the private sector in this area, he added, is critical. "They're the ones who have got the creativity, the inventiveness and the capacity to bring in new technologies and influence consumer behaviors in the direction of lower carbon life choices."

As climate change takes hold, Mr. Ward said, few businesses will be able to escape the impact of greater competition for resources. "As nations become more protective of their assets, and markets become more volatile, it can no longer be business as usual," he noted.

But the news is not all bad. "Tangible business opportunities will emerge, in areas ranging from energy efficiency to water conservation, for those who are flexible enough to respond," Mr. Ward said.

Lloyd's said its role is to "help society pick up the pieces when disaster strikes–whether that be weather-related catastrophes or political violence. We firmly believe that it is our role to help companies, their boards and their risk managers to plan and prepare for the future, and we hope that this report will contribute to this process."

Reports and analyses on emerging risk are available at www.lloyds.com/360.