Sanjay Patnaik, director of the Center on Regulation and Markets and Bernard L. Schwartz Chair in Economic Policy Development in Economic Studies, recently sat down with Dante Disparte, the founder and chair of Risk Cooperative and a member of the National Advisory Council for the Federal Emergency Management Agency (FEMA). They discussed the roles of the private and public sector in managing systemic economic risks, especially the risk of climate change.

Evidence of the economic costs of climate change can be found in the increasing prevalence and costs of climate disasters, including hurricanes and wildfires. Yet according to Mr. Disparte, climate risk has been overshadowed by political risk and the COVID-19 pandemic in many advanced economies, and as a result has been left off most companies’ balance sheets. Because companies fail to account for climate risk, the private costs of climate disasters are often being passed along to the taxpayer via public sector intervention. Mr. Disparte argues that companies must recognize the risks that climate change poses to their business operations and hedge this risk accordingly through purchasing insurance and through refraining from locating investments in disaster-prone areas or in promoting better adaptation and resilience.

Read the full article about climate change risks by Sanjay Patnaik and Dante Disparte at Brookings.