The Tamesis
The fashion industry operates under the assumption that cotton will continue to grow, ports will continue to function, employees will continue to work, and consumers will continue to shop. Climate tipping points threaten many of these things.
These are the thresholds at which natural systems begin to transition from one state to another, often in a self-reinforcing manner that is difficult or even impossible to reverse, like a spilled glass of water. Scientists are increasingly warning that this is a real risk and say some tipping points have already occurred, with implications for fashion.
Ice sheet collapse could mean long-term sea level rise around the world, threatening economic disruption in coastal areas. Degradation of the Amazon will mean the rainforest becomes a drier, poorer ecosystem, with consequences for biodiversity, local livelihoods and the flow of water that supports agricultural regions producing globally traded commodities, including cotton. A collapse or severe weakening of the Atlantic Meridional Overturning Circulation, which moves warm water from the tropics into the North Atlantic, could disrupt a system that has kept the UK and Europe relatively benign. Winters will become colder and summers will become warmer and drier – making crop production more difficult.
Despite growing concerns among scientists, companies across industries are not incorporating the compounding risks that climate tipping points may create into their risk planning. A survey of global banks last year by the United Nations Environment Program (UNEP) concluded that none fully incorporated tipping points into their entity risk assessments, while only 5% partially considered them.
“The tipping point hasn’t really happened yet,” said Francois Souchet, founder of climate data consultancy Swanstant. “I don’t know if people haven’t realized it yet, or if they’re still hoping for the best, and tipping points pose much more difficult questions.”
Pressure to change this situation may be growing. Earlier this month, JPMorgan Chase released a report highlighting the need for businesses and investors to start factoring climate tipping points into their decisions. Tipping points are difficult to quantify because the science is still evolving, the timing and scale of impacts are uncertain, and the financial consequences may be indirect, non-linear, and beyond normal pricing, the report said.
Rather than the gradual warming and incremental damage assumed in many climate risk models, tipping points increase the likelihood of sudden, cascading damage. The consequences may not be immediately apparent, but by then, the threshold may have been crossed. Standard valuation and underwriting tools are often built around short-term forecast horizons and historical relationships, meaning they are unable to capture risks that arise suddenly.
