Trump may be in deep denial about the climate crisis, but the market is not
While the virulently anti-climate Trump administration does a victory dance over the mangled remains of clean energy subsidies and ESG, CEOs are getting real — about the real climate damage being wreaked on the economy.
The climate economy disconnect could not be more stark. Last week, the CEO of Whole Foods warned that food shortages in supermarkets are happening because of climate change, not DEI.
Meanwhile, banks are firing sustainability officers in droves and focusing instead on climate risk, investing millions to improve their capacity to track the growing weather-related damage on the trillions of dollars of loans they hold on their balance sheets.
The new climate economy
While Trump may be in deep denial about the climate crisis the economy is not. “We will hit certain points where we’re not able to source certain things,” warned Jason Buechel, the CEO of Whole Foods and VP of Amazon Worldwide Grocery Stores at the Food Tank Summit in January.
Vast global food supply chains are feeling the heat, he warns. “We have to broaden awareness so customers know these things are happening, which can tie back to climate change,” he said. (This was reported in The Cool Down, a newsletter “about making it easy to help yourself while helping the planet.”
Yes, your gut is right. Climate change is having an impact on the cost and availability of everything from eggs and olive oil to chocolate and coffee — and the bottom line of food retailers.
Yes, your gut is right. Climate change is having an impact on the cost and availability of everything from eggs and olive oil to chocolate and coffee — and the bottom line of food retailers.
According to Bayer’s 2024 Farmer Voice survey, more than 61% reported “significant revenue loss” due to adverse weather over the past several years.
Hello climate risk
Grocery store CEOs are not the only executives getting worried about the growing risk of climate damage to their bottom line.
For years, banks ignored or downplayed the climate crisis, preferring instead to loan billions for the exploration and production of fossil fuels. As public concern about the damaging rise of carbon dioxide in the atmosphere increased, banks first feigned interest with toothless voluntary ESG initiatives that were more aligned with PR and marketing than balance sheets and risk modeling.
That is beginning to change. A New First Street Foundation analysis finds that 57 American banks now have $627 billion in real estate loans exposed to “material financial risk” from climate impacts.
First Street also reports that the geographic reach of climate exposure is propelling a wave of losses across the nation with more and more states reporting multiple billion-dollar catastrophic weather-related events.
Bank managers are now paying attention. Historically, climate was not a large part of credit risk analysis. Now, risk management experts are busy reprogramming risk models to account for the soaring damage from extreme weather events and from “transition” uncertainty, such as changing regulations and public policy.
Notably, banks are also recognizing that approximately two-thirds of their physical climate risk comes from indirect economic impacts, such as supply chain disruptions and lower productivity, rather than direct damage to assets.
JP Morgan’s new climate “intuition”
A good example of the change in bank attitudes is occurring at JPMorganChase, America’s largest bank. It is now supplementing ESG reports with the recent rollout of Climate Intuition, a thought leadership series, it says, is aimed at helping clients navigate risk. It was developed by Sarah Kapnick, the former chief scientist for NOAA and now head of Morgan Global Head of Climate Advisory.
The series is a modest step toward providing science-based assessments and practical applications to enhance climate-informed decision-making, the bank says.
What about fossil fuel lending?
Sounds reasonable. However, Kapnick’s “intuition” initiative analyzes every financial impact from extreme weather to Net Zero to regulatory policy development, but makes no mention of the impact of JPMorganChase’s $430 billion in new fossil fuel lending since 2015. Details, details.
When looking specifically at food inflation, climate change could drive up prices by as much as 3.2 percentage points annually by 2035.
So what does this all mean? Our “intuition” tells us that increasingly managing bank balance sheets will be a battle of two loan portfolios: Carbon-emitting fossil fuels against deteriorating real estate loans impacted by climate damage. But our intuition also tells us Morgan’s escalating concerns about climate risk won’t be enough to walk away from those oil and gas loans.
Food inflation
For food shoppers, a day is coming that marks the end of unlimited cheap food. A study by the Potsdam Institute for Climate Impact Research and the European Central Bank found that rising temperatures could increase global inflation by as much as 1% every year until 2035. When looking specifically at food inflation, climate change could drive up prices by as much as 3.2 percentage points annually by 2035.
The Trump factor
But there is a new risk to calculate. The Trump Administration’s exuberant attacks on climate action only amplify risk, uncertainty, and price volatility. Which raises an interesting question. With humans incapable of making progress on curbing climate damage, are “free markets,” — widely blamed for climate and environmental damage by progressives and environmentalists — ultimately going to determine the human response to climate change? Maybe Jeff Bezos had a point.
