Un-Natural Alliances: Multiple Criteria Decision Making 2017 Insurers, Bankers, Institutional Investors and Environmentalists Should Cooperate to Address the Growing Contagion of Climate Change Multiple Criteria Decision Making 2017 Dr. Blair Feltmate Head Intact Centre on Climate Adaptation bfeltmate@uwaterloo.ca July 10, 2017

Agenda Climate change is real, human-induced and irreversible Climate change is costly (Property & Casualty insurance) Examples of applied Multiple Criteria Decision Making Basement Flooding: uninsurable housing (P&C insurance) → mental health impacts (Health insurance) → mortgage arrears (banking/mortgage market) Loss of Wetlands: has an impact on urban/rural flood risk, and an impact on biodiversity → both impacts viewed as unrelated Business sector impacts of climate change Institutional investors Securities commissions Credit rating agencies Conclusion Multiple Criteria Decision Making could be used as a tool to materially reduce Canada’s climate risk profile

(0.08 oC/ decade for past 100 years) What Science Tells Us About Climate Change It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century (0.08 oC/ decade for past 100 years)

Source: International Energy Agency World Energy Supply 5 Million Barrels Oil Equiv./Day build 1,500 new coal plants now Source: International Energy Agency 1.3 billion new people

Costs of Extreme Weather: Catastrophic Insurable Losses Uninsurable Housing Market Growing Fort Mac Fire Alberta and Toronto Floods Eastern Ice Storm Ontario Wind and Rain Quebec Floods Courtesy: Insurance Bureau of Canada (Values in 2015 dollars) Note: Cost to government and homeowners 3-4X that of private insurers. .

Limited flood coverage will lead to mortgage defaults 60% of Canadians do not have sufficient funds to cover 1 month’s worth of necessary costs 48% of Canadians live pay cheque to pay cheque (Canadian Payroll Association) [Intact Centre working with RBC and Canadian Tire on basement flood protection programs] “Serious flooding has happened more than once on some properties and there are people who can’t get insurance. If we can improve their risk profile maybe they can get insurance.”

Home Flood Protection Program: CSA Standard Purpose - Home Flood Protection Program Limits potential for basement flooding Limits potential damage if basement does flood Technical Aspects of Assessment Assessment time per property = 2 hours Homeowner required to accompany assessor Assessment reviews 50 points of reference – for example: direct water away from foundation disconnect downspouts place plastic covers over window wells Connect battery back-up to sump pump, etc. “HFPP Lite” – a simplified, electronic version ROI – $1 yields $7 avoided basement flood losses per 10 years

Flood Resilient New Community Design Program: SCC Standard Purpose – establish best practices for designing new residential communities that are flood-resilient

The Health Stress of Flooding is Pan-Canadian

Retaining wetlands helps to lower flood risk Loss of Wetlands Retaining wetlands helps to lower flood risk Environmentalists Wetlands Biodiversity Ecosystem services Natural capital Deep ecology Capital Markets Business continuity Cash flow Lower insurance Lower cost of capital Fiduciary duty

Hydro Electric Power: California Drought (2011-2016) California in its 5th year of drought Hydro power generation is impacted Hydro typically constitutes 18% of California’s electricity supply – drought of 2011-2015 reduced supply to 10% – some hydro dams can become stranded assets Conversely, repeated flooding can create stranded substations

Fire Impact: Ft. Mac Fire Costliest Insurable Natural Disaster in Canadian History 2,400 structures destroyed About $3.6 billion in insurable losses Increases in P&C premiums Oil production from Suncor stopped for 1 month Fuel shortages across Petro-Canada gas stations in Western Canada estimated cost > $1 billion in provincial GDP (figures not final) Fire created a suspended asset in the oil sands sector

Recreation: Ski Resorts in Western Canada “When it doesn’t snow and it just rains all winter, well then it doesn’t matter what kind of snow-making equipment you have – it’s over.” Over past 100 years Whistler snowfall has dropped 20% Ski resorts can become stranded assets

Credit Rating Agencies Capital Markets: Paying attention to climate risk Canadian Securities Commissions [Administrators 51-333] Institutional Investors Credit Rating Agencies

Conclusion Requires Stakeholder Coordination/ Integration to Climate Change and Extreme Weather Events will get worse (climate change is irreversible) Every day we don’t adapt is a day we don’t have MCDM Applied to Climate Change – Must Coordinate Across… Property & Casualty Insurance Health Insurance Banking/Mortgage Market Environmentalist Community Securities Commissions Institutional Investors Credit Rating Agencies Governments (Federal, Provincial, Municipal) Requires Stakeholder Coordination/ Integration to Limit Climate Change Risk/Impacts