Wrong, Bloomberg, Climate Change Isn’t the Next ‘Black Swan’ for Markets – Watts Up With That?
A recent article on Bloomberg titled The market’s next black swan is climate change, “If more is not done to slow the warming of the planet caused by greenhouse gas emissions, global stock values will fall by 40%,” according to Mark Gongloff.
The article is full of false claims and unverifiable predictions. Here is what the article claims:
Climate change will really hurt stock prices.
Not doing more to slow the planet’s warming from greenhouse gas emissions will deplete 40% from global equity valuationestimates a new study by the EDHEC Risk Climate Impact Institute. Taking into account climate change-driving “tipping points” like the Amazon rainforest die slowly or one big burp of gas from melting permafrost, market losses would rise to as much as 50%. On the other hand, if the world acted together and limited warming to 2 degrees Celsius above pre-industrial levels, the impact on stock prices would be just 5% to 10%.
First, what is a black swan event?
A black swan event is an unexpected, rare, and serious event that has a large impact and is difficult to prepare for. The term is based on a Latin idiom that says black swans do not exist. The term was popularized by Nassim Nicholas Taleb, an economist, professor, and writer.
The article argues that climate change is such an event.
The “really, really bad” part of this article is more about the emotional reaction of a stock trader than any actual quantification. Of course, it has been pointed out that stock trading is largely emotional in the first place, according to Investopedia:
- Trading psychology is the emotional component of an investor’s decision-making process, which can help explain why some decisions seem more rational than others.
- Trading psychology is largely characterized by the influence of both greed and fear.
With that said, it’s easy to understand why the article and the research it references can easily be attributed to the fear factor in stock trading.
And in the article, fear is used as a motivator:
And like the objects in your rearview mirror, the damage from climate change is closer than you think. Weather disasters take a toll on the global economy. $1.5 trillion in the 2010snearly tenfold higher than in the 1970s after adjusting for inflation, according to the World Meteorological Organization. Reinsurance company Swiss Re has proposed that insured losses from natural disasters will double in the next decade.
But this fear is based on climate model projections, not actual data. If actual data were used to look ahead, using some metrics, the trend would be for less weather (not climate) damage in the future. For example, Storms. The data shows no trend:
Or tornadoNot only is there no upward trend, but the trend is actually negative:
Similarly, heat wave They were much worse before:
In fact, the data combines multiple extreme weather events, the data shows. death from severe weatherhas declined sharply over the past century.
While Bloomberg likes to blame climate for extreme weather events, extreme weather events are just that, weather event. Such events are often confused with climate change, but this is a mistake. Weather and climate operate on very different time scales
Many real-world data sets show no increase droughtor heat wave; no increase flood; no increase Tropical cyclones and hurricanes; no increase winter storm; and no increase thunderstorm or tornadoor hail, lightning and strong winds associated with thunderstorms.
From an investor’s perspective, it all comes down to money. The most important thing about extreme weather events is that they destroy assets, but even The trend of property loss has been decrease as the Earth warms slightly:
Investors often focus on “net returns” without regard to anything else. In this case, net returns are the absence of evidence that the future will be more dangerous, deadly, or destructive. Likelihood (or lack thereof) stock market predictions are inaccurate as output of computer models used to predict climate.
“It’s hard to make predictions, especially about the future,” said baseball player Yogi Berra. reported to have saidThis truth is evident every day in the stock market.
Ultimately, since climate change doesn’t cause increasingly extreme weather, it can’t cause increasingly painful business losses—the data shows that it doesn’t. My advice to investors? Follow the data, not the money, and suggest that Bloomberg’s Mark Gongloff “take a tranquilizer.”
Anthony Watts is a senior fellow for climate and environment at the Heartland Institute. Watts has worked in the weather industry in front of and behind the camera as a broadcast meteorologist since 1978, and currently does daily radio forecasting. He has created graphic weather presentation systems for television, specialized weather measuring equipment, and co-authored peer-reviewed articles on climate issues. He runs the world’s most viewed climate website, the award-winning wattsupwiththat.com.
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