Extreme climate events are presenting a new and unexpected challenge to the private sector in Latin America. While attention understandably focuses on the ordinary citizens caught up in catastrophes such as the floods in Tabasco, Mexico and Hurricane Noel in the Dominican Republic, the painful economic effects on the hemisphere’s business community are often lost in the news coverage. With mounting evidence that the frequency and severity of such disasters are squarely linked to global warming, firms that operate, invest or are based in Latin America must act aggressively to reduce their losses from the twenty-first century’s increasingly volatile climate.
The good news is that there are concrete and effective methods of adaptation—responses that reduce harm from current and anticipated impacts of climate change and that can prevent the private sector from getting caught flat-footed. These measures employ existing technologies, in areas from energy efficiency to water management to building design, which can help firms diminish the economic sting of global warming. The six guidelinesfor reducing environmental risk will put businesses on their way to effectively coping with the heat.
The challenge of implementing these adaptations has an added urgency because firms in the region will likely have to act on their own. While close to a billion dollars are invested annually in Latin America in the reduction of carbon emissions, known as mitigation, two of the leading funds established by industrialized countries to finance the region’s adaptation—the Special Climate Change Fund and the Least Developed Countries Fund—are either empty or currently unavailable for the hemisphere. An agreement to distribute a third source, the Adaptation Fund, was reached in Bali in December 2007, but the details remain undetermined.
Kevin Watkins, the director of the United Nations Human Development Report Office, told The New York Times in April 2007 that developed-world financing of adaptation in vulnerable countries “borders on the derisory.”
Some Latin American managers are in fact already beginning to adopt new strategies. But avoiding economic disaster will require a lot more advanced planning across diverse sectors of the economy. Extreme climate events are only one of the warming-related hazards likely to affect bottom lines. According to the experimental model created by Yale economist Robert Mendelsohn, Latin America will face between $49 billion and $119 billion in annual losses from climate change by 2100, depending on the amount of global warming. The areas facing the greatest damages are agriculture, energy and access to water…
