How does climate change affect forced migration and the risk of abandoned assets?
Human-caused climate change is, without doubt, significantly impacting us and the planet. But how much does it affect or force people in moving? How can we analyse assets that might need to be abandoned?
Two main baselines answer this question.
In the meantime, we have created land in order to move to climate-desirable locations. Extensive engineering and coastline redevelopment created the affluent parts of Miami and Honolulu today, whether hotel rooms for thousands of dollars per night or apartments for millions of dollars.
Humanity has moved into the ocean to take advantage of the climate by building assets there.
Can ocean changes force asset abandonment?
Now, as an additional factor, humanity is changing the climate.
Separating out the impacts of human-caused climate change on decisions or lack of decisions to arrive, stay, or leave is not easy.
A single storm or drought might be exacerbated by climate change, such as warmer oceans intensify a hurricane. Yet no storm or drought (or related disaster) is caused by climate change only.
After all, excess water and water shortfalls have always been part of human existence. Any disaster and climate-related forced migration is much more about our mismanagement of, or lack of choices regarding water management than about the climate changing.
Difficulties nevertheless manifest, such as for coastal settlements including Miami and Honolulu. Sea levels are rising.
By 2100, they could reach levels not seen for about 4,000 years. Combined with increased intensity of storms and storm surges - along with saltwater contaminating freshwater, agricultural land, and homes - retaining assets cost-effectively in many current locations could be undermined.
Plus, as the oceans take up carbon dioxide from the air, the water acidifies. Higher acidity and higher water temperatures could induce swift changes in coastal ecosystems. If mangroves or coral reefs die, then the sea's full fury could strike the shoreline. Erosion might be devastating and rapid, washing away assets.
Those who can afford to do so, might feel compelled to leave. Will their land and property be sellable or must asset managers absorb a substantial loss because no one wants to, or even could, live by the beaches we manufactured which are now under threat?
What about extreme heat forcing asset abandonment?
Away from shorelines, extreme heat takes its toll now.
Heat-humidity combinations exacerbated by climate change are already threatening the liveability of many places from the foothills of the Indian Himalayas to Australian farms and cities. Buildings in Melbourne have air conditioning, but will it operate reliably with frequent days above 40°C?
As more people tap into the power grid during extreme heat, how frequent will power outages become? At what point do people give up and seek to move to other places, reducing interest in these assets?
The knock-on effects of extreme heat for food production and water availability could further add to the heat and humidity-related forced migration from large swathes of land.
The financial impact of forced migration
People forced to leave their homes remove labour from their origins and often are not permitted to work at their destinations until they have gone through the process of obtaining a legal status. Yet they need to be housed, fed and clothed, all of which costs. The United Nations Refugee Agency has a budget of just over $10 billion per year, which barely addresses the need and which does not account for expenditures from other agencies and from governments.
And these figures are mainly for people forced to cross international borders. In 2021, the Internal Displacement Monitoring Centre (within the Norwegian Refugee Council) in Geneva estimated that the 22 countries most affected by forced internal displacement spend $20 billion per year dealing with people forced to move internally.
Asset managers need to be concerned because people without productive livelihoods, who are often not even permitted to work, cannot invest in infrastructure.
Even if they wanted to retrofit or adapt the properties where they stay, they probably do not have the finances and might not have permission to make the structures and systems more robust. Naturally, people still need to live and seek fulfilling income opportunities, so shadow economies spring up and governments lose out on tax revenue. Maintenance for and monitoring of infrastructure’s robustness to deal with climate change can lapse, if the occupiers are seen as temporary, unimportant, or lacking official status. Physical risks can be amplified to lives and assets.
Data and new technologies can support preparation
Prevention is typically cheaper than cure.
Climate change is and always has been one input into migration, among many complex and diverse factors. Critically, failure to support people and asset managers in addressing and preparing for current risks can lead to asset abandonment.
However, new technologies emerge - making it easier to examine locations at risk and assets that can benefit from retrofitting and adaptation, preventing abandoning.
Climate X Adapt is the first of its kind climate adaptation solution for asset managers and financial services, integrating physical risk assessments with adaptation data that highlights measures' expected ROI.
Asset managers can now identify adaptation opportunities at a glance, assessing their effectiveness in de-risking assets and therefore driving resilience strategy across their portfolio and safeguarding the communities they serve.
To learn more about Adapt, visit our website at https://www.climate-x.com/adapt