A whole new climate

Evidence has shown that that the global climate is changing, and in certain geographies the effects on local and regional weather have been pronounced. Yet the general consensus seems to be that climate change is an issue to be tackled in the future as the full effects of climate change will not be felt for some decades.

However, this view becomes more difficult to sustain when investments are being made in, say, infrastructure, where performance is expected to be maintained for several decades but where a changed climate could lead to reduced efficiency or even failure.

Although the scope of the potential impacts of climate change on society may be uncertain, the direct impacts on property and infrastructure are more obvious. The potential scale of these physical impacts on infrastructure assets therefore requires careful consideration. This is already altering the way that infrastructure investors consider risks associated with long-term investment decisions.

Measured changes

Over the past decades we have witnessed measured changes in local and regional weather patterns associated with a steady rise in global average annual temperature. The specific effects of a changing climate are complex to predict although there is evidence of an increase in the frequency and severity of extreme weather events, the prevalence of inland flooding, droughts and rising sea levels.

These phenomena indicate that the climate is indeed changing, and quantifying the scale of potential effects on property and infrastructure provides a snapshot of how the climate could be in the future. The World Economic Forum’s Global Risks 2011 report describes climate change as “very likely” and has predicted a highly significant impact on the global economy. The risks associated with climate change include more frequent and more severe storms, prolonged droughts, increasing water scarcity and a higher degree of inland and coastal flooding. These categories of risk in turn highlight the potential for disruption to critical infrastructure such as IT, power and transport.

Climate change is evidenced in a number of different ways. Geographical variation in scale and impact could perhaps be one reason for inactivity in relation to adaptation.

Without the need to deal with the effects of an extreme weather event, many may regard the relevance of climate change as somewhat distant. However, the effects of change are pervasive across society, with both direct and indirect consequences on the expected return on investment in critical infrastructure.

As the climate continues to change, so the need to consider climate change as an area of risk in long-term investment decisions becomes increasingly necessary.

Infrastructure which is relied upon to transport people, materials and goods; to power industry, offices and homes; and to supply water, is often old and, as a consequence, may not be resilient to increasing pressure from episodes of severe weather, floods and droughts.

At this time it is important to consider the extent of future climate change, and the appropriate responses of societies and government. Scientific measurements have shown how severe weather events, such as storms, floods and periods of extreme high wind, have become more severe in recent decades. Over the same period, extreme weather events appear to have become more frequent and the past year has shown an unprecedented scale of extreme weather affecting large swathes of critical infrastructure.

Vulnerability

The expected financial returns from an infrastructure investment could therefore be affected by the site of the asset or its vulnerability to rising sea levels, extremes droughts and floods, and the effects of more regular and more severe storm damage.

For example, many insurers now require an increased scope of the maximum probable loss modelling for long-term investment projects, such as renewable energy projects, which are often proposed for location in areas with high and increasing natural catastrophes.

Predictions of how the climate will change in the future are available from a number of scientific sources, and most agree that the climate will continue to change, although there remain large variations in the estimated potential of this change. It is estimated that the cost of the floods in theUK in 2007 was £3 billion (€3.4 billion; $4.8 billion); in 25 years’ time it is predicted that annual flood damage could cost the UK economy up to £10 billion.

Organisations such as the Confederation of British Industry (CBI) suggest that companies should review the impacts of previous bad weather events in order to assist in the prediction of how future climatic change will affect the business. Business interruption due to physical damage of assets caused by extreme storms, the failure of critical infrastructure and disruption in supply chains are all considered areas of increased risk. By assessing both the direct costs associated with physical damage along with the indirect costs associated with business interruption and failure of supply chains, a business can gain an understanding of how future extreme weather events could affect operations.

When trying to assess the potential effects of climate change on infrastructure assets, many will look to mathematical models to predict the potential impact.

For infrastructure assets with a long life expectancy, it will be important to take a good view of what the physical world will probably look like in decades to come.

In the longer term, infrastructure assets should be expected to operate in a carbonconstrained environment, in addition to needing to cope with increased climate volatility. As such, long-term assets should be designed to be both as resilient and future-proof as possible. Since many infrastructure assets will be expected to be “fit-for-purpose” in 30 or 40 years’ time, when the world will look and feel very different from today, preparations need to be made now.

Electric vehicles

The requirement to change may in fact manifest itself in a number of ways, with behavioural and technological adaptations in response to climate change. For example, the demands of an increasing proportion of electric vehicles will require consideration of the need to provide availability of power for recharging. Also, there will be alterations in average road load associated with a prevalence of smaller, electric powered vehicles. Both will affect the way that roads will need to be designed in the future.

The infrastructure on which society and business relies needs to be designed in a truly sustainable manner. The power, road, rail, water and critical IT infrastructure on which reliance is placed will need to be fit-for-purpose in respect to its ability to respond to the long-term demands of a changing climate.

In coming decades, the climate will change further, with higher average annual temperatures, increased rainfall during certain seasons, period of drought and more frequent and more severe extreme weather events, as well as steadily rising sea levels.

The design and construction of critical infrastructure needs to ensure resilience over an extended operational life. 

Dr Cliff Warman is EMEA environmental practice leader at Marsh, a unit of Marsh & McLennan Companies. Marsh & McLennan Companies is a global professional services firm with annual revenues exceeding $10 billion.