CFA Certificate in ESG Investing Curriculum 2023 PDF

© CFA Institute. For candidate use only. Not for distribution. CHAPTER 3 Environmental Factors LEARNING OUTCOMES Mastery The candidate should be able to: 3.1.1 explain key concepts relating to climate change, including climate change mitigation, climate change adaptation, and resilience measures 3.1.2 explain key concepts related to other environmental issues, including pressures on natural resources, including depletion of natural resources; water; biodiversity loss; land use and marine resources; pollution; waste; and a circular economy 3.1.3 explain the systemic relationships between business activities and environmental issues, including systemic impact of climate risks on the financial system; climate-related physical and transition risks; the relationship between natural resources and business; supply, operational, and resource management issues; and supply chain transparency and traceability 3.1.4 assess how megatrends influence environmental factors; environmental and climate policies; international climate and environmental agreements and conventions; international, regional, and country-level policy and initiatives; carbon pricing 3.1.5 assess material impacts of environmental issues on potential investment opportunities, corporate and project finance, public finance initiatives, and asset management 3.1.6 identify approaches to environmental analysis, including company-, project-, sector-, country-, and market-level analysis; environmental risks, including carbon footprinting and other carbon metrics; the natural capital approach; and climate scenario analysis 3.1.7 apply material environmental factors to financial modeling, ratio analysis, and risk assessment 3.1.8 explain how companies and the investment industry can benefit from opportunities relating to climate change and environmental issues: the circular economy, clean and technological innovation, green and ESG-related products, and the blue economy 116 Chapter 3 1 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors INTRODUCTION 3.1.1 explain key concepts relating to climate change, including climate change mitigation, climate change adaptation, and resilience measures The range of environmental factors that have a material financial impact on investments—the E in “ESG”—is broad and far reaching. Environmental risks have continued to gain prominence, generating heightened concern worldwide. The increased understanding of the mechanisms through which human actions impact the planet has led to growing public acceptance of the need to reduce pollution and global emissions of greenhouse gases, to preserve and improve biodiversity, and to use natural resources more efficiently. In addition to measures aimed at the mitigation of environmental impact, there is a growing need of adaptation to a changing environment, as advances in climate science have also cast light on processes that are already or may soon become irreversible: “The cumulative scientific evidence is unequivocal: Climate change is a threat to human well-being and planetary health. Any further delay in concerted anticipatory global action on adaptation and mitigation will miss a brief and rapidly closing window of opportunity to secure a liveable and sustainable future for all.”1 Environmental decision making requires navigating both factual considerations (about what is likely to happen) and normative considerations (about what conditions of the world are desirable or acceptable). For investors, gaining an appreciation of the evolving policies, technologies, and consumer preferences regarding sustainability can support the pursuit of profitable investments and help prevent losses in investment value. Whether it is governments planning industrial policy, regulators deciding emissions accounting rules and securities regulation, executives setting out corporate strategy, or consumers weighing purchase options, we will illustrate in what follows how environmental factors are already affecting a wide and expanding share of behaviors, sectors, and institutions. Other investors may see the support of projects and activities with a positive environmental impact as a standalone end, regardless of financial impact. More broadly, the nature of investment mandates, time horizons, ultimate beneficiaries, or personal values—all can play a role in defining the preferences of investors in terms of risk, return, and impact. Growing awareness of environmental and climate impacts is reflected in increasing levels and scope of corporate disclosure (e.g., the adoption of the recommendations of the Task Force on Climate-Related Financial Disclosures, or TCFD) and the introduction of policies (e.g., the European Green Deal) to accelerate sustainable finance. This chapter identifies and describes some of the key environmental factors and major external drivers to help analysts, portfolio managers, and asset owners define investor beliefs and assess material environmental risks and opportunities in their portfolios. The term climate change has come to mean the changes in the earth’s systems that determine the climate, including the increase in heat-trapping gases in the atmosphere and the change in the reflectivity of some of the earth’s surfaces. Climate change mitigation is the set of actions that reduce the added warming of the earth that is caused by human actions. Climate change adaptation is the set of actions taken to adapt 1 Intergovernmental Panel on Climate Change (IPCC), “Climate Change 2022: Impacts, Adaptation and Vulnerability: Summary for Policymakers” (2022). © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues 117 human practices to function better in a warming world with rising seas and more frequent and intense droughts, precipitation, and storms. Climate resilience measures are adaptation actions that are able to function even though the climate is changing. Economic activities from supplying fuels and raw materials to producing food are extractive in nature, usually leaving exploited planetary systems less capable of providing the next round of goods and services to meet society’s and individuals’ demands. For example, current metal ores often have less than one-tenth the concentration of metals as when these ores were first mined. This means that there is at least 10 times as much tailings, or crushed rock produced, and greater disturbance to the land. This increases the price of the metal being mined and increases pressure to find and exploit new sources. Increasing harvesting of trees for forest products is putting pressure on natural forest resources as harvest cycles are shortened to meet demand. As these resources are depleted, there is always a search for substitutes, but in many cases, as with water, there is no substitute. This is a growing problem, with increased water demand and decreased supply because of climate change–induced drought in the southwest and western parts of the United States, for example. Urban development is decreasing the amount of agricultural and forest land. Moreover, energy projects, including solar and wind farms, are resorting to taking over agricultural land and cutting down forests. This loss of important ecosystems has led to a dramatic decline in the number of species and the extinction of many species. A 2019 IPBES report predicted that 1 million species would go extinct by 2100.2 Our current economic system produces large amounts of waste, such as the vast amount of plastic waste that is making its way into oceans. All industrial processes release pollution, meaning unwanted harmful—sometimes toxic—chemicals, heat, or radiation. In the natural world, there is neither waste nor pollution. All materials not used by any organism become either building materials, food, or energy for a different organism. That is the idea behind the circular economy: It is an economy whereby all materials are used and reused multiple times—for example, turning waste paper into other forms of paper or into cellulose building insulation rather than burning it or putting it into a landfill. KEY ENVIRONMENTAL ISSUES 3.1.2 explain key concepts related to other environmental issues, including pressures on natural resources, including depletion of natural resources; water; biodiversity loss; land use and marine resources; pollution; waste; and a circular economy Economics and the environment are inextricably linked. Consider the similarities between one widely used definition of economics—the study of “the relationship between ends and scarce means which have alternative uses”3—and a widely used definition of environmental sustainability: seeking “to meet the needs and aspirations 2 IPBES, “Global Assessment Report on Biodiversity and Ecosystem Services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services,” edited by E. S. Brondizio, J. Settele, S. Díaz, and H. T. Ngo (2019). https://ipbes.net/global-assessment. 3 L. Robbins, An Essay on the Nature and Significance of Economic Science (London: Macmillan, 1932): p. 15. 2 118 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors of the present without compromising the ability to meet those of the future.”4 The use and depletion of natural resources and the trade-offs between present costs and future benefits are topics that have been central to economics since its inception as a discipline. Less appreciated, historically, has been the dependency of the successful conduct of economic activity on a stable, habitable planetary system. In recent decades, however, the scientific community has issued increasingly stark warnings that the consequences of economic activities—notably the burning of fossil fuels for energy, the conversion and degradation of ecosystems from resource extraction and land development, and other forms of pollution and environmental degradation—are jeopardizing the stability of what for over 10,000 years has been a relatively stable climate system, supportive of human society.5 This instability could lead to dangerous, potentially catastrophic consequences for all life on earth. The differing time horizons for the consequences of the range of human actions present a major challenge for policymakers and investors in this area. First, the impacts of environmental change unfold over different scales in time and space, from short-term, acute manifestations to longer-term, chronic patterns (e.g., the failure of a farmer’s annual crop due to a flash flood compared to long-term reduced food productivity in an entire region due to the cumulative effects of erosion of fertile topsoil, drought, and a changing climate). Second, the causes of change also exhibit different dynamics. In some cases, the removal of a stressor removes the associated harm (e.g., if logging stops, a forest will likely regrow), but in other cases, the harm persists (e.g., if a factory stops emitting greenhouse gases, its past emissions continue to warm the atmosphere). Note that regrowing forests is a start, but it’s mitigation, not a solution, until there is a forest capable of doing the same as the old growth forest; this can take 5–10 years or more. This is important to note in the context of carbon offsets. The notion of “planetary boundaries” has been introduced as a way to highlight certain classes of risks and stressors. They describe boundaries to processes (such as global temperature and nitrogen limits, continued protection from damaging ultraviolet radiation provided by the stratospheric ozone layer, and biodiversity loss) that regulate the stability and resilience of the earth operating system, with concerns raised that certain economic activities are on track to breach the boundary or may have already done so. For example, it is estimated that human activities “now convert more atmospheric nitrogen into reactive forms than all of the earth’s terrestrial processes combined.” 6 Beyond these boundaries lie domains of increased risk or uncertainty—including, at the extreme, planetary configurations never seen before in the history of our species. Yet, despite the growing sophistication and power of climate modeling, an element of irreducible uncertainty remains, stemming from the undetermined consequences of actions and policy measures not yet taken. One the one hand, investment techniques and practices developed to help investors navigate uncertainty (such as the assignment of probability to the costs and benefits of future scenarios, appropriately discounted) can be extended to certain areas of environmental decision making. On the other hand, the possibility of systematic, undiversifiable, and potentially catastrophic risks (as in some of the worst-case climate scenarios) highlights the importance of precautionary judgments that must be made in the absence of full evidence and perfect information. 4 United Nations, “Report of the World Commission on Environment and Development: Our Common Future” (1987). https://sustainabledevelopment.un.org/content/documents/5987our-common-future .pdf. 5 Most notably, the reports from the IPCC, an intergovernmental body of the United Nations. 6 Stockholm Resilience Centre, “Planetary Boundaries” (2017). www.stockholmresilience.org/research/ planetary-boundaries.html. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues “Better safe than sorry” and “no such thing as a free lunch” have both been used to illustrate aspects of rational decision making; the tension between the absolute and relative approaches to risk taking that they describe is also present for environmentally aware investing. What measures are worth enacting and financing (and at what cost), and what outcomes are worth avoiding (whatever the cost)? Such questions form the conceptual backdrop to much of this chapter. Conversely, it has been suggested that bringing investment and economic activities back in line with planetary boundaries can not only help to address environmental risks but—through a more judicious and equitable use of natural resources—also protect and enhance important socioeconomic factors, such as employment and access to health.7 Reconciling traditional notions of financial value with a more nuanced understanding of broader positive and negative impacts (“externalities”) that are not easily quantifiable in monetary terms represents an area of ongoing innovation—not just in finance but also in policy and law. To choose a few examples that will be discussed in this chapter, the trade in such securities as carbon allowances uses market mechanisms as an incentive for companies to reduce their future pollution; the development of “natural capital” approaches aims to recognize the present value of ecosystems as a guide to policy making; and a growing wave of lawsuits seeks compensation for past contributions to environmental damages. According to an update by the Stockholm Resilience Centre from 2022, six of nine planetary boundaries (see Exhibit 1) have already been crossed as a result of human activity: ► climate change, ► loss of biosphere integrity, ► land-system change, ► freshwater (green water boundary), ► novel entities (including plastic pollution), and ► altered biogeochemical cycles (phosphorus and nitrogen loading).8 7 K. Raworth, “Meet the Doughnut: The New Economic Model That Could Help End Inequality,” World Economic Forum (28 April 2017). www.weforum.org/agenda/2017/04/the-new-economic-model-that -could-end-inequality-doughnut/. 8 Stockholm Resilience Centre, “Planetary Boundaries.” 119 Chapter 3 Environmental Factors Exhibit 1: An Illustration of Planetary Boundaries CLIMATE CHANGE BIOSPHERE INTEGRITY E/MSY BII (Not yet quantified) Increasing risk 120 © CFA Institute. For candidate use only. Not for distribution. FRESHWATER CHANGE Green water Freshwater use (Blue water) STRATOSPHERIC OZONE DEPLETION erating spac e op e Saf ATMOSPHERIC AEROSOL LOADING LAND-SYSTEM CHANGE (Not yet quantified) OCEAN ACIDIFICATION NOVEL ENTITIES P N BIOGEOCHEMICAL FLOWS Source: Stockholm Resilience Centre, “The Planetary Boundaries Framework” (2022). Licensed under CC BY 4.0 Credit: "Azote for Stockholm Resilience Centre, based on analysis in Persson et al 2022 and Steffen et al 2015". https://www.stockholmresilience.org/research/planetary -boundaries.html While it may be seen as a good in itself, the pursuit of environmental sustainability can also be justified because it benefits financial interests. Conversely, as societal preferences, regulation, and technology change, ongoing investments in environmentally damaging activities may carry unrewarded risks, which can lead to losses in revenues and falling asset values. There are numerous studies and frameworks that identify a range of environmental factors that are relevant to how investors assess risks and opportunities in their decisions. This field of study is vast and constantly evolving. In this section, the environmental issues covered will include A. climate change, B. pressures on natural resources and systems (including water, biodiversity, land use and forestry, and marine resources), and C. pollution, waste, and a circular economy. Although this section will cover each issue separately, it is important to note that these issues are linked and have systemic consequences for business activities and vice versa, as we will further explain. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues Climate Change Climate change is defined as a change of climate, directly or indirectly attributed to human activity, that alters the composition of the global atmosphere and that is, in addition to natural climate variability, observed over comparable time periods.9 Climate change is one of the most complex issues facing us today and involves many different dimensions, including ► science, ► economics, ► society, ► politics, and ► moral and ethical questions. It is an issue with local manifestations (e.g., extreme weather events, such as more frequent and/or more intense tropical cyclones) and global impacts (e.g., rising global average temperatures and sea levels), which are estimated to increase in severity over time. Because the planet does not warm uniformly—the Arctic is warming more than three times faster than the global average10—atmospheric and ocean circulation patterns are being altered in complex and not fully understood ways. The main man-made driver of the warming of the planet is rising emissions of heat-trapping greenhouse gases (GHGs). These gases are dispersed throughout the atmosphere and allow visible sunlight to reach the earth’s surface, where it is absorbed, thereby warming the land, oceans, and atmosphere and evaporating water. And the warm earth radiates heat back toward space, but these gases absorb heat and reradiate some of it back to the earth’s surface. The gases act in a similar manner to the glass windows of an automobile that allow visible light energy in but block the radiant heat from leaving. Few people have experienced this effect in a glass “greenhouse,” which gives the extra heating its name, and today it is more descriptively referred to as the “hot car effect.” Carbon dioxide (CO2) is the most significant contributor to the warming effect, because of its higher concentration in the atmosphere, which is at levels not seen since long before Homo sapiens first appeared (see Exhibit 2).11 9 Definition of climate change by the United Nations Framework Convention on Climate Change (UNFCCC). 10 Arctic Monitoring and Assessment Programme, “Arctic Climate Change Update 2021: Key Trends and Impacts: Summary for Policy-Makers” (2021). www.amap.no/documents/download/6759/inline. 11 NOAA, “Climate Change: Atmospheric Carbon Dioxide” (2020). www.climate.gov/news-features/ understanding-climate/climate-change-atmospheric-carbon-dioxide. 121 Chapter 3 Environmental Factors Exhibit 2: CO2 Levels in the Atmosphere for Past 800,000 Years CARBON DIOXIDE OVER 800,000 YEARS 450 2019 average (409.8 ppm) 400 350 Carbon dioxide (ppm) 122 © CFA Institute. For candidate use only. Not for distribution. highest previous concentration (300 ppm) 300 250 warm period (interglacial) 200 150 100 800,000 ice age (glacial) 600,000 400,000 Years before present 200,000 0 NOAA Climate.gov Data: NCEI Source: NOAA, “Climate Change: Atmospheric Carbon Dioxide” (2020). Much of this increase has occurred with the accelerated burning of fossil fuels since the industrial revolution, with more than half the CO2 emissions from the late 17th century onward occurring in the last 30 years.12 Other important GHGs include methane, nitrous oxide, and other fluorinated gases. Although the average lifetime in the atmosphere of such gases is shorter than that of carbon dioxide, they have a much higher “global warming potential”—30 times stronger in the case of methane and over 23,000 times stronger for sulphur hexafluoride—that is the same weight of carbon dioxide when compared over a century.13 Emissions of GHGs primarily come from energy, industry, transport, agriculture and changes in land use (such as deforestation and the degradation of forests, grasslands, wetlands, and agricultural soils), with CO2 resulting from the burning of fossil fuels (e.g., in power plants, gas boilers and vehicles) representing the highest share—around two-thirds—of all GHGs (see Exhibit 3).14 12 Institute for European Environmental Policy, “More Than Half of All CO2 Emissions since 1751 Emitted in the Last 30 Years” (29 April 2020). https://ieep.eu/news/more-than-half-of-all-co2-emissions -since-1751-emitted-in-the-last-30-years. 13 United States Environmental Protection Agency, “Climate Change Indicators: Greenhouse Gases” (2021). www.epa.gov/climate-indicators/greenhouse-gases. 14 UN Environment Programme (UNEP), “Cut Global Emissions by 7.6 Percent Every Year for Next Decade to Meet 1.5°C Paris Target—UN Report,” press release (26 November 2019). www.unep.org/ news-and-stories/press-release/cut-global-emissions-76-percent-every-year-next-decade-meet-15degc. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues 123 Exhibit 3: Global GHG Emissions by Economic Sector Iron and s t Gra ssla nd 0.1% es Cro water rn 3.5 ing % tat 2.2 ion % dfills 1.9% (1.3%) Chemicals 2.2% Cement 3% Ener gy u se in ic 3.6troch al & % em ic Ind u Agriculture, Forestry & Land Use 18.4% pla n 1.4 d % Lan Waste bu -fe Was ) 1% o ( %) cc (0.6 ) a b % to lp .5 & pu (0 od er & ery o F ap hin P ac M ) .2% (24 ry st for Non al cu op De l ura ult ils ric so .1% Ag 4 i on at 3% ltiv 1. e Ric Cr stock & Liveanure (5.8%) m m eel (7 etals (0rr.7o%us .2% ) Ch ) pe em stry u r ind Othe % 10.6 te (3 .2%) Industry (5.2%) Energy 73.2% 2%) Agriculture Energy in ing (1.7%) & Fish Road 11.9% Transpor t an sp ort (16. ons issi tion em ve roduc 5.8% i t i Fug ergy p en from Tr el fu d ion te ust .8% a c b 7 llo m na co mm rgy u e rcia s e i n b u il d i n g s ( 1 7. 5 ) .9% s (10 l (6.6%) Residential building Av 1.9 iat % ion R pe Pi Ene Co %) ing ipp Sh % .4%) 0.3%) 1.7ail (0 line ( U OurWorldinData.org – Research and data to make progress against the world’s largest problems. Licensed under CC-BY by the author Hannah Ritchie (2020). Source: Climate Watch, the World Resources Institute (2020). Note: This is shown for the year 2016 — global greenhouse gas emissions were 49.4 billion tonnes CO2eq. Sources: Data from World Resources Institute; H. Ritchie and M. Roser, “Emissions by Sector” (2020). https://ourworldindata.org/emissions-by-sector#total-greenhouse-gas-emissions-by -sector. Limiting global warming has been compared with avoiding overfilling a bathtub by simultaneously turning off the faucets and opening the drain—in other words, reducing both the flow of new emissions and removing the stock of existing GHGs in the atmosphere. When these rates of addition and removal are equal, the level stabilizes. In the case of the atmosphere, our activities are adding carbon dioxide and other GHGs, and it is the natural world that is removing carbon dioxide. However, it is the amount of GHGs remaining in the atmosphere that determines the extent of warming. To achieve the desired global average temperature requires adjusting atmospheric concentrations to specified levels.15 That point is often overlooked when government and business leaders agree to become “zero net carbon by 2050.” Preindustrial levels of atmospheric CO2 were 278 ppm (parts per million) in the atmosphere, and along with other naturally occurring greenhouse gases, including water vapor and methane, these levels maintained a stable climate conducive to agriculture and the development of urban civilizations as we know them. In 2022, CO2 levels had climbed to 417 ppm—an increase of 50%!16 15 UN Framework Convention on Climate Change, “Article 2: Objective” (1992). https://unfccc.int/ resource/ccsites/zimbab/conven/text/art02.htm. 16 R. Betts, “Met Office: Atmospheric CO2 Now Hitting 50% Higher than Pre-Industrial Levels” (16 March 2021). www.carbonbrief.org/met-office-atmospheric-co2-now-hitting-50-higher-than-pre -industrial-levels/. 124 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors To achieve any specified temperature rise limitation, there is an additional complication. As the world warms from direct GHG additions, amplifying feedbacks cause additional warming from nature. A warming ocean adds more water vapor, thawing permafrost releases more methane—melting sea ice, ice caps in Greenland and Antarctica, and glaciers everywhere—and less snow cover reduces the amount of sunlight that is reflected back into space. Hence, the warming earth causes natural processes to create additional warming. One concerning possibility is that these feedbacks might place the world on course to breach certain “tipping points.” Like a sand pile toppling when just a few more grains are added, this notion is used to describe abrupt—and potentially irreversible—changes to the earth system in response to a relatively small change in warming. Such potential tipping points include the following: ► The thawing of the permafrost—frozen ground in the Northern Hemisphere—which allows microbes to decompose previously frozen plant and animal material and release vast amounts of carbon dioxide and methane, thereby further accelerating climate change uncontrollably. This is similar to what happens when electric power is interrupted: Frozen foods thaw and are quickly decomposed by bacteria. ► The disintegration of the West Antarctic ice sheet, which holds enough ice to raise global sea levels by over three meters. ► The “dieback” of the Amazon rainforest—changes in temperature and deforestation that would render the forest unable to sustain itself, making one of the world’s largest natural stores of carbon emit more carbon than it absorbs. ► Melting the Greenland ice cap, thereby reducing the salinity and density of North Atlantic waters, which could shut down the system of currents in the Atlantic Ocean that brings warm water and the air over it to Northern Europe. The ironic cooling of this region while the world is warming may lead to “widespread cessation of arable farming” in the United Kingdom and parts of Europe.17 Exhibit 4 illustrates some of the socioeconomic impacts resulting from climate change. 17 R. McSweeney, “Explainer: Nine ‘Tipping Points’ That Could Be Triggered by Climate Change,” Carbon Brief (10 February 2020). www.carbonbrief.org/explainer-nine-tipping-points-that-could-be -triggered-by-climate-change. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues Exhibit 4: Select Socioeconomic Impacts of Climate Change Impacted Economic System Liveability and Workability Food Systems Area of Direct Risk Socioeconomic Impact 2003 European heat wave US$15 billion (£12 bn) in losses 2 × more likely 2010 Russian heat wave ≈55,000 deaths attributable 3 × more likely 2013–14 Australian heat wave ≈US$6 bn (£4.8 bn) in productivity loss Up to 3 × more likely 2017 East African drought ≈800,000 people displaced in Somalia 2 × more likely 2019 European heat wave ≈1,500 deaths in France ≈10 × more likely Agriculture outputs declined by 15% 3 × more likely Up to 35% decline in North Atlantic fish yields Ocean surface temperatures have risen by 0.7°C (1.3°F) globally US$62 bn (£49.5 bn) in damage 3 × more likely 2016 Fort McMurray Fire, Canada US$10 bn (£8 bn) in damage, 1.5 million acres of forest burned 1.5–6 × more likely 2017 Hurricane Harvey US$125 bn (£99.8 bn) in damage 8%–20% more intense 2015 Southern African drought Ocean warming Physical Assets 2012 Hurricane Sandy How Climate Change Exacerbated Hazard Infrastructure Services 2017 flooding in China US$3.55 bn (£2.8 bn) 2 × more likely of direct economic loss, including severe infrastructure damage Natural Capital 30-year record low Arctic sea ice in 2012 Reduced albedo effect, amplifying warming 70%–95% attributable to human-induced climate change Potential reduction in water supply for more than 240 million people 70% of global glacier mass lost in past 20 years is due to human-induced climate change Decline of Himalayan glaciers Sources: Woods Hole Research Center (now Woodwell Climate Research Center); analysis by Jonathan Woetzel, Dickon Pinner, Hamid Samandari, Hauke Engel, Mekala Krishnan, Brodie Boland, and Carter Powis, “Climate Risk and Response: Physical Hazards and Socioeconomic Impacts,” McKinsey Global Institute (16 January 2020). www.mckinsey.com/business-functions/sustainability/our-insights/climate -risk-and-response-physical-hazards-and-socioeconomic-impacts?sid=3046547320. In 2021, the Intergovernmental Panel on Climate Change (IPCC) estimated that human activities have caused approximately 1.1°C (1.8°F) of global warming above pre-industrial levels, and global warming is likely to reach 1.5°C (2.7°F) by 2040 125 126 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors even under the very low emissions scenario.18 Note that these numbers are global averages, so warming in different regions may be much higher: Warming over land has been twice that observed over oceans, for example.19 The IPCC is mandated by 196 governments to synthesize climate science and publish reports. A 2018 report determined what needed to be done to meet the somewhat arbitrary goals set in Paris in 2015 and agreed to by all governments of limiting global warming–caused average temperature increases by 2.0°C by 2100 and to make every effort to limit the rise to 1.5°C. The IPCC’s Sixth Assessment Report on the physical science of climate change, published in August 2021, was dubbed “code red for humanity” because of the irrevocable evidence that climate change is already having significant impacts and the 1.5°C goal will not be met without immediate and significant action. Specifically, scientists ran multiple scenarios and found that under the five illustrative scenarios, in the near term (2021–2040), the 1.5°C global warming level is very likely to be exceeded under the very high GHG emissions scenario (SSP5-8.5), likely to be exceeded under the intermediate and high GHG emissions scenarios (SSP2-4.5 and SSP3-7.0), more likely than not to be exceeded under the low GHG emissions scenario (SSP1-2.6) and more likely than not to be reached under the very low GHG emissions scenario (SSP1-1.9).20 These differences of a few fractions of a degree may seem small but are highly consequential. The IPCC further estimated that limiting warming to 1.5°C (2.7°F) instead of 2°C (3.6°F) by the end of this century could reduce “climate-related risks to health, livelihoods, food security, water supply, human security and economic growth”: around 400 million fewer people frequently exposed to extreme heatwaves and around 10 million fewer people exposed to rising sea levels, in addition to reduced impacts on vulnerable ecosystems, such as the Arctic and warm water coral reefs (which “mostly disappear” at 2°C [3.6°F]).21 See Exhibit 5 for various potential climate change impacts based on different warming scenarios. 18 IPCC, “Climate Change 2021: The Physical Science Basis: Summary for Policymakers” (2021): p. 15. www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM_final.pdf. 19 M. Byrne, “Guest Post: Why Does Land Warm Up Faster Than the Oceans?” Carbon Brief (1 September 2020). www.carbonbrief.org/guest-post-why-does-land-warm-up-faster-than-the-oceans. 20 IPCC, “Climate Change 2021: The Physical Science Basis” (6 August 2021). www.ipcc.ch/report/sixth -assessment-report-working-group-i/. 21 IPCC, “Special Report: Global Warming of 1.5°C” (2018). www.ipcc.ch/report/sr15. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues Exhibit 5: Selected Impacts of Climate Change under Different Warming Scenarios HALF A DEGREE OF WARMING MAKES A BIG DIFFERENCE: EXPLAINING IPCC’S 1.5°C SPECIAL REPORT 1.5°C 2°C 2°C IMPACTS Global population exposed to severe heat at least once every five years 14% 37% 2.6X SEA-ICE-FREE ARCTIC AT LEAST 1 EVERY EXTREME HEAT Number of ice-free summers SEA LEVEL RISE Amount of sea level rise by 2100 100 YEARS Vertebrates that lose at least half of their range SPECIES LOSS: PLANTS Plants that lose at least half of their range SPECIES LOSS: INSECTS Insects that lose at least half of their range ECOSYSTEMS Amount of Earth’s land area where ecosystems will shift to a new biome PERMAFROST Amount of Arctic permafrost that will thaw CROP YIELDS Reduction in maize harvests in tropics CORAL REEFS Further decline in coral reefs FISHERIES Decline in marine fisheries 10 YEARS 10X WORSE .06M 0.40 0.46 4% 8% WORSE 8% 16% WORSE 6% 18% WORSE 7% 13% METERS SPECIES LOSS: VERTEBRATES AT LEAST 1 EVERY WORSE METERS 4.8 6.6 MILLION KM 2 MILLION KM 2 MORE 2X 2X 3X 1.86X WORSE 38% WORSE 2.3x 3% 7% WORSE 70– 90% 99% 29% 1.5 MILLION TONNES 3 MILLION TONNES UP TO WORSE 2x WORSE Source: Kelly Levin, Sophie Boehm, and Rebecca Carter, “6 Big Findings from the IPCC 2022 Report on Climate Impacts, Adaptation and Vulnerability,” World Resources Institute (27 February 2022). www.wri.org/insights/ipcc-report-2022-climate-impacts-adaptation-vulnerability. 127 128 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors Estimates of the economic costs of climate change vary but suggest significant potential losses. A 2015 report suggested damages by 2100 equivalent to US$4 trillion (£2.9 trillion) in net present value,22 and the IPCC has suggested costs of US$54 trillion (£38.8 trillion) and US$69 trillion (£49.6 trillion) for 1.5°C (2.7°F) and 2°C (3.6°F) scenarios, respectively.23 There are, however, important caveats when considering such results, which are highly dependent on assumptions and scenarios. First, under the standard economic practice of discounting, cash flows far into the future have very little present value. This perspective, however, may be under-representing the risks of potentially catastrophic outcomes that could severely affect economies and countless human lives. This argument has been put forth by climate economist Martin Weitzman, with his so-called dismal theorem, which suggests that standard cost–benefit analysis is inadequate to deal with the potential downside losses from climate change. However small their probability, as long as we cannot completely rule out scenarios of climate-induced civilizational collapse, their expected value must be properly understood as being equivalent to negative infinity, he has argued.24 On a different but related note, economist Nicholas Stern has argued that moral considerations warrant the use of a low discount rate when assessing future climate damages, in order to place adequate value on the lives and welfare of future generations.25 The thrust of Stern’s and Weitzman’s arguments is that the issue of how much society should invest today in order to safeguard a livable climate in the future requires a different—mathematical and ethical—treatment from standard economic problems, such as, “Would you prefer to receive £10 today or £100 in one year?” Second, many economic models used to calculate future climate damages usually share the limitation of assuming negative impacts that ramp up only gradually, and usually do not model sharp discontinuities and “tipping points.” In other words, they model a society that “keeps warm and carries on,” even though some of these scenarios approach the limits of adaptability and habitability. For example, one widely used model estimates that 6°C (16.2°F) of warming would result in a sacrifice of only about 9% of global income by the end of the century.26 However, it has been suggested that at global average warming of around 7°C (12.6°F), regions of the world would see persistent combinations of temperature and humidity where the average healthy adult overheats and dies after a few hours (even if they sit in the shade, are resting, and have access to water) because the human body can no longer cool itself through perspiration and breaks down.27 (This “wet-bulb” temperature threshold has already been momentarily crossed on several occasions in South Asian 22 B. Gardner, “The Cost of Inaction,” Economist Intelligence Unit (24 July 2015). https:// eiuperspectives.economist.com/sustainability/cost-inaction. 23 IPCC, “Special Report: Global Warming of 1.5°C.” 24 M. L. Weitzman, “Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change” Review of Environmental Economics and Policy 5 (Summer 2011): 275–92. https://scholar.harvard.edu/files/ weitzman/files/fattaileduncertaintyeconomics.pdf. For a critical reply, see W. D. Nordhaus, “The Economics of Tail Events with an Application to Climate Change,” Review of Environmental Economics and Policy 5 (Summer 2011): 240–57. www.journals .uchicago.edu/doi/10.1093/reep/rer004. 25 N. H. Stern, The Economics of Climate Change: The Stern Review (Cambridge, UK: Cambridge University Press, 2006). 26 B. Ward, “A Nobel Prize for the Creator of an Economic Model That Underestimates the Risks of Climate Change,” Grantham Research Institute (2 January 2019). www.lse.ac.uk/granthaminstitute/news/ a-nobel-prize-for-the-creator-of-an-economic-model-that-underestimates-the-risks-of-climate-change/. 27 S. C. Sherwood and M. Huber, “An Adaptability Limit to Climate Change Due to Heat Stress,” Proceedings of the National Academy of Sciences 107 (3 May 2010). www.pnas.org/content/107/21/9552. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues cities.28) Almost inevitably, models are calibrated based on past economic outcomes, but this presents a potential tension when dealing with what may be radically different future outcomes. Responding to climate change is usually presented in terms of two main approaches: 1. reducing and stabilizing the levels of heat-trapping GHGs in the atmosphere (climate change mitigation) or 2. adapting to the climate change already taking place (climate change adaptation) and increasing climate change resilience. However, this is not a binary option: Climate change adaptation will always be required because we are already experiencing the effects of climate change, and some of the most effective climate policies pursue both objectives simultaneously. We will look at climate change mitigation and adaptation in the following subsections. Climate Change Mitigation Climate change mitigation is a human intervention that involves reducing the sources of GHG emissions (for example, the burning of fossil fuels and wood for electricity, heat, or transport) and simultaneously enhancing the sinks that store these gases (such as forests, oceans, and soil) in an attempt to slow down the process of climate change. The goal of mitigation is to ► “avoid dangerous interference with the climate system,”29 ► stabilize GHG levels in a time frame sufficient to allow ecosystems to adapt naturally to climate change, ► ensure that food production is not threatened, and ► enable economic development to proceed in a sustainable manner. While discussions of climate change policy usually call for adaptation to the warming that is irreversible, the overarching framing is usually that of mitigation—that is, trying to prevent what is not inevitable. The aim of the international Paris Agreement on climate change, for example, is to hold “the increase in the global average temperature to well below 2°C (3.6°F) above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C (2.7°F) above pre-industrial levels” by the end of the century.30 Examples of mitigation strategies include greater adoption and policies to promote sustainability across different areas, such as the following: ► Energy. Deploying renewable energy sources (such as wind, solar, geothermal, hydro, and some biofuels that are shown to be low carbon and produced sustainably). Unfortunately, not all biofuels are better than petroleum alternatives when life-cycle emissions, including nitrous oxide from fertilizing crops, and other production emissions are considered.31 Burning wood 28 “Explained: How Jacobabad in Pakistan crossed a temperature threshold too severe for human tolerance,” Indian Express (8 July 2021). https://indianexpress.com/article/explained/explained-pakistan -jacobabad-crossed-a-temperature-threshold-too-severe-for-human-tolerance-7383104/. 29 UN Framework Convention on Climate Change, “Article 2: Objective.” 30 United Nations, “Paris Agreement” (2015). https://unfccc.int/sites/default/files/english_paris _agreement.pdf. 31 Harish K. Jeswani, Andrew Chilvers, and Adisa Azapagic, “Environmental Sustainability of Biofuels: A Review,” Proceedings of the Royal Society A: Mathematical, Physical and Engineering Sciences 476 (November 2020). https://doi.org/10.1098/rspa.2020.0351. 129 130 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors to generate electricity or commercial-scale heat releases more CO2 at the time of combustion and forgoes accumulation of carbon had the trees been allowed to continue growing.32 ► ► ► ► ► ► Buildings. Retrofitting buildings to become more energy efficient and using building materials and equipment that reduce buildings’ carbon footprint. Transport. Adopting more sustainable, low-carbon transportation and infrastructure (such as electric vehicles, rail and metro, and bus rapid transit), particularly in cities, but also decarbonizing shipping, road, and air transport. Land use and forestry. Improving forest management, reducing deforestation, and growing more of our existing forests to achieve their potential for biodiversity and carbon accumulation—a management process known as proforestation. 33 Agriculture. Improving crop and grazing land management to increase soil carbon storage. Carbon pricingand other economic measures. Implementing carbon reduction policies that penalize heavy emitters and promote GHG emission reductions in the form of either a carbon tax or cap-and-trade mechanism and direct payment for carbon accumulation by forests and soils. Industry and manufacturing. Developing more energy efficient processes and less carbon intensive products; reducing process emissions from cement and steel making and other greenhouse gases, including methane leaks from the fossil fuel industry and agriculture; and developing equipment and processes to facilitate carbon capture, energy storage (e.g., batteries, pump systems), recycling efficiency, and so on. Industry, materials and manufacturing present particular challenges. Although deindustrialization or a reduction in consumption could, in theory, have mitigation effects (consider the significant drop in GHG emissions and in economic output accompanying the COVID-19 pandemic), due consideration must also be given to the associated negative societal impacts (e.g., recessions and unemployment). Alternatively, achieving green industrialization at scale (including the decommissioning and retrofitting of existing facilities) may, unless addressed through improved resource efficiency and circular design, be a reforestation material-intensive process. The IPCC has noted the relatively uneven state of play with regard to technological innovation in several relevant areas: For almost all basic materials—primary metals, building materials and chemicals—many low- to zero-GHG intensity production processes are at the pilot to near-commercial and in some cases commercial stage but not yet established industrial practice. Introducing new sustainable basic materials production processes could increase production costs but, given the small fraction of consumer cost based on materials, are expected to translate into minimal cost increases for final consumers. Hydrogen direct reduction for primary steelmaking is near-commercial in some regions. Until new chemistries are mastered, deep reduction of cement process emissions will rely on already commercialised cement material substitution and the 32 John Sterman, William Moomaw, Juliette N. Rooney-Varga, and Lori Siegel, “Does Burning Wood Help or Harm the Climate?” Bulletin of the Atomic Scientists (10 May 2022). https://thebulletin.org/ premium/2022-05/does-wood-bioenergy-help-or-harm-the-climate/. 33 William R. Moomaw, Susan A. Masino, and Edward K. Faison, “Intact Forests in the United States: Proforestation Mitigates Climate Change and Serves the Greatest Good,” Frontiers in Forests and Global Change (11 June 2019). www.frontiersin.org/articles/10.3389/ffgc.2019.00027/full. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues availability of [carbon capture and storage]. Reducing emissions from the production and use of chemicals would need to rely on a life-cycle approach, including increased plastics recycling, fuel and feedstock switching, and carbon sourced through biogenic sources, and, depending on availability, [carbon capture and utilization], direct air CO2 capture, as well as [carbon capture and storage]. Light industry, mining and manufacturing have the potential to be decarbonised through available abatement technologies (e.g., material efficiency, circularity), electrification (e.g., electrothermal heating, heat pumps) and low- or zero-GHG emitting fuels (e.g., hydrogen, ammonia, and bio-based & other synthetic fuels).34 CASE STUDIES The Race to Net Zero Stabilizing global average temperature rise at any level depends on achieving a balance between GHG sources going into and out of the atmosphere—that is, reaching “net-zero” emissions. The earlier this point is reached, the less warming the world is likely to experience. The current “net-zero GHG emissions” strategy endorsed by many governments and CEOs is intended to meet the Paris Agreement goal of keeping temperature from rising by more than 1.5°C. The world’s foremost assembly of climate scientists—the IPCC—found that to have a two in three chance of limiting global average temperature rises to 1.5°C (2.7°F) requires reducing emissions 45% below 2005 levels by 2030, net-zero CO2 emissions around 2050, and continued net negative emissions until beyond 2100, coupled with deep reductions in emissions of other GHGs, such as methane.35 Net-zero targets are increasingly being adopted by governments (e.g., those of the United Kingdom, the EU, China, Japan, Canada, and South Korea), states and territories (e.g., Nevada in the United States and Victoria and Queensland in Australia), and companies (e.g., Amazon, ArcelorMittal, BT Group, BP, Ikea, Qantas, Sony, and Walmart). As of April 2022, 88% of global emissions of greenhouse gases, 90% of GDP, and 85% of the world’s population were in jurisdictions covered by net-zero targets.36 These 2050 targets have also been adopted by many corporations. Modeled net-zero pathways can therefore differ significantly in their emissions profile—with the role of interim targets (2025, 2030) and the assumed reliance on carbon capture and/or offsets (e.g., in emissions-intensive companies’ net-zero commitments) coming under increased scrutiny. Many offsets simply transfer credit for emission reductions and do not change the amount of CO2 in the atmosphere. The higher the ambition of mitigation policies, the higher the required upfront investment. The IPCC has estimated that in the energy sector alone, between US$1 trillion and US$4 trillion (£0.7 trillion to £2.9 trillion) of additional annual investment in energy supply and around US$1 trillion (£0.7 trillion) in energy demand will be 34 IPCC, “Climate Change 2022: Mitigation of Climate Change: Summary for Policymakers” (2022). https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_SummaryForPolicymakers.pdf. 35 Note that this assumes the world will not significantly rely on what are currently speculative, expensive carbon capture technologies. It is technically possible to construct other temperature pathways, depending on modelling assumptions – the scale up of carbon capture, and the potential for reductions in non-CO2 GHG emissions globally. However, given the risks of “tipping points” discussed in the previous section, caution is needed when considering the extent to which ongoing emissions will be compensated by future technological fixes. 36 Net Zero Tracker (2022). https://zerotracker.net/. 131 132 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors needed up to 2050 to limit warming to 1.5°C (2.7°F).37 However, the IPCC has further noted that “how these investment needs compare to those in a policy baseline scenario is uncertain.”38 In other words, even scenarios without climate mitigation require investments—for example, in oil and gas extraction and transportation or in coal and gas power plants—and it is unclear how those costs may evolve alongside temperatures. For example, around half of the oil and gas fields in the Russian Arctic are estimated to be in areas where melting permafrost can cause severe damage to infrastructure, such as pipelines and shipping terminals;39 in mid-2020, such melting under a diesel storage tank caused the largest environmental accident in the Russian Arctic region.40 Given that the world is already investing approximately US$1 trillion (£0.7 trillion) yearly in the energy sector,41 the important question is, What kind of energy system is being financed for new and expired capital replacement, and what is the extent to which today’s investments risk locking in future emissions? Looking more broadly across sectors, the IPCC has highlighted that many mitigation options exist today, many of which have lower economic costs compared to alternatives (see Exhibit 6 ). 37 IPCC, “Special Report: Global Warming of 1.5°C.” 38 IPCC, “Special Report: Global Warming of 1.5°C.” 39 Jan Hjort, Olli Karjalainen, Juha Aalto, Sebastian Westermann, Vladimir E. Romanovsky, Frederick E. Nelson, Bernd Etzelmüller, and Miska Luoto, “Degrading Permafrost Puts Arctic Infrastructure at Risk by Mid-Century,” Nature Communications 9 (2018). www.nature.com/articles/s41467-018-07557-4. 40 BBC, “Russian Arctic Oil Spill Pollutes Big Lake Near Norilsk” (9 June 2020). www.bbc.co.uk/news/ world-europe-52977740. 41 International Energy Agency, “Investment Estimates for 2020 Continue to Point to a Record Slump in Spending” (23 October 2020). www.iea.org/articles/investment-estimates-for-2020-continue-to-point -to-a-record-slump-in-spending. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues Exhibit 6: Overview of Mitigation Options and Their Estimated Range of Costs and Emission Reduction Potentials in 2030 Mitigation options Potential contribution to net emission reduction (2030) GtCO2-eq yr–1 0 2 4 6 Wind energy Solar energy Bioelectricity Energy Hydropower Geothermal energy Nuclear energy Carbon capture and storage (CCS) Bioelectricity with CCS Reduce CH4 emission from coal mining Reduce CH4 emission from oil and gas Carbon sequestration in agriculture AFOLU Reduce CH4 and N2O emission in agriculture Reduced conversion of forests and other ecosystems Ecosystem restoration, afforestation, reforestation Improved sustainable forest management Reduce food loss and food waste Shift to balanced, sustainable healthy diets Avoid demand for energy services Buildings Efficient lighting, appliances and equipment New buildings with high energy performance Onsite renewable production and use Improvement of existing building stock Enhanced use of wood products Fuel efficient light duty vehicles Electric light duty vehicles Transport Shift to public transportation Shift to bikes and e-bikes Fuel efficient heavy duty vehicles Electric heavy duty vehicles, incl. buses Shipping – efficiency and optimisation Aviation – energy efficiency Net lifetime cost of options: Biofuels Industry Costs are lower than the reference Energy efficiency 0–20 (USD tCO2-eq–1) Material efficiency 20–50 (USD tCO2-eq–1) Enhanced recycling 50–100 (USD tCO2-eq–1) Fuel switching (electr, nat. gas, bio-energy, H2) 100–200 (USD tCO2-eq–1) Feedstock decarbonisation, process change Cost not allocated due to high variability or lack of data Carbon capture with utilisation (CCU) and CCS Cementitious material substitution Uncertainty range applies to the total potential contribution to emission reduction. The individual cost ranges are also associated with uncertainty Other Reduction of non-CO2 emissions Reduce emission of fluorinated gas Reduce CH4 emissions from solid waste Reduce CH4 emissions from wastewater 0 2 4 6 GtCO2-eq yr–1 Source: IPCC, “Climate Change 2022: Mitigation of Climate Change: Summary for Policymakers” (2022). https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_SummaryForPolicymakers.pdf . However, despite the availability of options, the rate of deployment, set against the backdrop of the current rate of emissions and the insufficient strength of the policies so far announced by governments worldwide, may render certain mitigation goals increasingly unachievable. To illustrate the scale of the challenge, in 2020, the COVID-19 pandemic led to the largest recorded drop in yearly CO2 emissions, approximately 7%. It is estimated that similar reductions would be needed each year until 2030 to meet the 1.5°C (2.7°F) goal.42 Despite a suite of policies introduced to foster a ‘green recovery’ after the pandemic (see the following box, “The ‘Green Recovery’”), the UN has noted that given the global rebound in emissions, “the opportunity to use pandemic recovery spending to reduce emissions has been largely missed.”43 42 UNEP, “Emissions Gap Report 2020” (2020). www.unep.org/emissions-gap-report-2020. 43 UNEP, “Emissions Gap Report 2021” (2021). www.unenvironment.org/emissions-gap-report-2021. 133 134 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors THE “GREEN RECOVERY” The roster of policy measures announced by governments in the aftermath of the COVID-19 pandemic has created an opportunity to promote sustainability objectives, alongside economic development. A survey of economists has highlighted several policy areas perceived to have a high “multiplier” effect on economic activity and high potential to decrease GHG emissions: investments in “clean” physical infrastructure, renovations or retrofits to improve energy efficiency, natural capital investment, clean energy research and development (R&D), and investment in education and training.44 The reality on the ground has been mixed, with capital and policy support continuing to flow to both “green” and “brown” sectors. For example, a review of country-level measures in the EU found that less than a third of the total €700 billion in analyzed recovery plans was assessed as likely to have a positive or very positive climate contribution.45 At the global level, the International Energy Agency estimated that at the end of October 2021, US$470 billion have been earmarked by governments to support clean energy.46 As illustrated in Exhibit 7, a significant gap still remains between the shorter-term policy commitments of governments (known as nationally determined contributions, or NDCs) and the magnitude of emission cuts needed. 44 C. Hepburn, B. O’Callaghan, N. Stern, J. Stiglitz, and D. Zenghelis, “Will COVID-19 Fiscal Recovery Packages Accelerate or Retard Progress on Climate Change?” Smith School Working Paper 20-02 (2020). 45 Green Recovery Tracker, “Country Reports” (2022). www.greenrecoverytracker.org/country-reports -overview. 46 International Energy Agency, “Sustainable Recovery Tracker” (2021). www.iea.org/reports/ sustainable-recovery-tracker. © CFA Institute. For candidate use only. Not for distribution. Key Environmental Issues Exhibit 7: Global GHG emissions under Different Scenarios and the Emission Gap in 2030 (median and 10th and 90th percentile range) Source: UNEP, “Emissions Gap Report 2021” (2021). www.unenvironment.org/emissions-gap -report-2021. This brings us to the actions needed in response to warming that cannot be averted—in other words, to climate adaptation. 135 136 Chapter 3 © CFA Institute. For candidate use only. Not for distribution. Environmental Factors Climate Change Adaptation Adapting to a changing climate involves adjusting to actual or expected future climate events, thereby increasing

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