Transcript by Kensho. 

Lindsey Hall: I'm Lindsey Hall, Head of thought leadership at S&P Global Sustainable1.  

Esther Whieldon: And I'm Esther Whieldon, a senior writer on the Sustainable1 Thought Leadership Team 

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

In 2022, the world experienced major climate-related disasters. For example, Pakistan experienced record-breaking rainfall in July and August that affected more than 30 million people. Europe had its second highest yearly temperature on record, and the Western and Central U.S. experienced drought and heat waves that cost about $22 billion in damages. Also in the U.S., Hurricane Ian made landfall in Florida as a category 4 hurricane in late September, costing nearly $113 billion in damages and causing more than 150 deaths. Moreover, 2022 was the sixth warmest year on record, and that's according to scientists at the U.S. National Oceanic and Atmospheric Administration, or NOAA.

Esther Whieldon: NOAA just issued its annual report on climate trends in the U.S. in 2022. This report is a big deal in the sustainability world because each year, it helps us quantify the physical risks of climate change. For example, NOAA includes a tally of major weather-related disasters. I'm talking here about the events that each cost at least $1 billion in damages. 

To learn more about NOAA's findings and the implications, I talked with 2 climatologists from NOAA's National Centers for Environmental Information, or NCEI. They are Karin Gleason and Adam Smith. Let's turn first to my discussion with Adam. He outlined some of the costliest disasters of last year.

Adam Smith: So 2022 was yet another very active year across much of the country from coast to coast. We analyzed 18 separate billion dollar weather and climate disasters, the cumulative cost of those disasters was in excess of $165 billion. In fact, we're still calculating the cost for the Christmas Winterstorm Cold Wave. And both of these in terms of frequency and costs, 2022 was the third highest for frequency and also the third highest for cost in our inflation adjusted period of record dating back to 1980. So in 2022, there were many diverse extremes across the country, drought heat waves, winter storms, the flood in St. Louis and also in Eastern Kentucky, mini-hand high wind events, 3 hurricane events and then the drought heat wave. 

But the most impactful events from 2022 would be Hurricane Ian, that was in excess of $100 billion in total direct losses across much of Florida, with the storm surge, the high wind and the heavy rain flooding well inland from the coast. And that's the third most costly hurricane only behind Hurricane Katrina and Hurricane Harvey. But it may surprise people that the most -- the second most costly impactable event was the Western and Central drought heat wave. That was $22.2 billion. It's the most costly drought in a decade dating back to 2012. So everything from reduced hydropower in the Western states to reduce commerce along the Mississippi River given the low water levels in many of the fall months in addition to the agricultural impacts to crops and livestock across more than a dozen states. 

We're seeing our vulnerabilities across different sectors of the economy really laid bare from these different extremes that are happening in tighter space time frequencies, and we call those compound disasters.

Esther Whieldon: Adam went on to describe how these major disasters also resulted in hundreds of deaths.

Adam Smith: So in the U.S., for these $1 billion disasters alone, I believe there were 474 direct indirect fatalities. And I think that's the eighth highest count out of the 43 years we have in this analysis. And a lot of that had to deal with the heatwave and Hurricane Ian and also the Christmas time winter storm, which was quite impactful, that will likely be a multibillion-dollar event. 

And the question is, is our infrastructure set up to try to deal with these more intense extremes. I think that it's fair to state that much of the world operates on a 20th century infrastructure and economy, but now we're living in a 21st century climate. And so the inefficiencies of those 2 realities are becoming more clear as we move into the future. And you know there are a lot of factors that go into this. I mean, the simplest way to perhaps think about it in just the United States as an example, we have more exposure, more people, more assets living in vulnerable areas in harm's way. So the wildland urban interface, the river basins and flood plains and people, of course, like to live along the coast, which are densely populated in asset-rich locations, prone and hurricanes.

So you've got the exposure angle, but you also have vulnerability. So where we build and how we build, our building codes really aren't in much of the country are the minimal, don't exist, or they're just not up to snuff for the extremes that we face in this country. And of course, climate change is, in fact, supercharging several types of these extremes that may lead to billion dollar disasters. Again, the mega drag out West, the wildfire season becoming almost year round now. And then the Eastern parts of the country, we're seeing more heavy rainfall, urban flooding, river-based flood events because as we know, warm rather holds or water vapor, therefore, the extreme rainfall potential is higher. And as an example, in the 2010s decade, the United States had more billion flood events just from heavy rainfall, urban flooding river-based than we did in the 1980s, 1990s and 2000s combined, all inflation adjusted to present day dollars. So it shows you exposure plus vulnerability plus climate change really sets us up. We have our work cut out for us to better mitigate against future damages that we know will continue.

Esther Whieldon: Was there anything we didn't get to or anything you wanted to...

Adam Smith: Yes. I could just drop one line here, 1 or 2 notes. So the first would be, over the last 7 years from 2016 through 2022, there have been 122 separate billion dollar weather in climate disasters that have impacted the United States, killing at least 5,000 people and costing over $1 trillion in damage from our assessment. In addition to the mega drought in the West in the longer wildfire seasons that we've seen in recent years and then the heavier precipitation and flooding events we've seen in recent years in the East, another trend, which may be a combination of bad luck, but also perhaps a bit of climate change in influences the fact that we have had Category 4 were Category 5 landfalling hurricanes in 5 of the last 6 years. And NOAA's database dates back to 1851. And we've never had a 6-year period with that many category 4 or Category 5 hurricanes making U.S. landfall. So there are a lot of trends that are certainly not going in the right direction in terms of extremes, exposure and vulnerability.

Esther Whieldon: That's right. And you just reminded me also this -- the biggest hurricane we had this year, it was very close to a Category 5 hurricane, right? It was like one wind speed short of it or something like that?

Adam Smith: Yes, in 2022, Hurricane Ian, the most costly event of the year was close to a Category 5. Just like what we saw in 2021, a Hurricane IDA was also a very strong category 4. And that was also the most costly event in 2021. 

I can make another quick note that as far as infrastructure and investment we saw how the U.S. Army Corps of Engineers designed and built the pump and levy system around the city of New Orleans post-Katrina, so more than a decade-long project. But from what I can tell and talking to people and looking at the assessment, it seems that the $14.5 billion investment to put that new infrastructure around New Orleans really protected the city quite well from a strong hurricane that was moving slowly with wind surge and very heavy rain. You may have paid for itself in just one storm in terms of the 2021 Hurricane IDA. So there are silver linings to all of this as far as if we learn lessons and we choose to make investments in the future in areas particularly vulnerable to extremes, we know that will be impacted again. So quick cost-benefit analysis may show that the math at the end of the day isn't too complicated. It's just a matter of figuring out the order in which to make the investments.

Esther Whieldon: This theme of how the climate is changing and testing our systems is something I also heard from Karin Gleason. Here she is talking about overall temperature and other broad weather trends in the U.S. and globally. 

Karin Gleason: During 2022, the average annual temperature for the contiguous U.S. or the Lower 48 ranked 18th warmest year on record, and that's out of the 128 years of record keeping. Kind of breaking that down regionally, we saw above average conditions from the West Coast to the Gulf of Mexico and from the Gulf up towards the Northeast, so kind of in a U-shape around the Lower 48, with temperatures kind of near average in sort of the upper Midwest and portions of the Midwest for the year. Now that's on average for the year. So certainly, there was a variation from month to month. But overall, those are the locations that were warmer or close to average. 

Turning our attention to precipitation for the year. for the Lower 48, the total average precipitation for the year ranked as the 27th driest year on record. And basically, large portions of the Western U.S. were dry for a majority of the year. The central planes were very, very dry. There were some wet spots in the upper Midwest and along portions of the East Coast. But by and large, it was a dry year all in all. 

We do track Alaska closely because that's certainly a location where there are lots of eyes paying attention to what's happening there because being in the higher latitudes. Alaska is more prone and we've seen a greater amount of warming in shorter periods of time. So they've warmed quite a bit compared to the middle attitudes. And so in Alaska, we saw a warm year. It was 16th warmest out of 98 years for them. Precipitation kind of is somewhat the big story, Alaska, that and wildfires. They ended up finishing the year fourth wettest. 

In a warming climate, you don't necessarily expect every year to be super extreme, record breaking, there's going to be year-to-year variability and for different reasons. One of the big drivers is the Enzo pattern or the El Nino Southern Oscillation pattern in the Eastern Equatorial Pacific. And in general, there's a large signal that when there's an El Nino or a warming of those Eastern equatorial Pacific waters, then it generally has this warming effect like on top of sort of like a baseline for the whole globe.

 And during La Niña seasons, which is a cooling of the Eastern equatorial Pacific Waters, it has the sense of kind of dampening or slightly cooling the globe as a whole. So certainly, there are going to be regional variations, but we're in a we're calling a triple dip La Niña -- so the cooling of the waters, and this is the third winter that we've entertained this. And so in general, there is an overall global cooling effect. It's just kind of within the noise of a given year. It's not necessarily a sustained situation. But if you imagine a temperature graph and you see the stair steps climbing, what happens during those La Niña years, you don't necessarily keep climbing. You might climb a little bit, but maybe you wouldn't climb as much as you would if there were neutral conditions or El Nino. So I know that's one thing that has been talked about and speculated is that if we do move into an El Nino, say, for next winter, it's possible that in 2024, we might start to see a rise in global temperatures again that is consistent with what we saw before we were in this La Niña. 

So we'll have to wait and see what happens. But I think the overall picture here is that in a warming climate, we expect to see greater frequency of extremes. Certainly, we're seeing that not only here in the U.S. but in other parts of the globe. We see that dryer places are getting drier, wetter places are getting wetter. Certainly, we've seen that even in the U.S., where drought coverage across the Western U.S. remains significant for a second year in a row. And despite the fact that we've had some significant rainfall and some snow accumulation as well for the last 3 or so weeks, drought is still present. Every little bit helps. -- drought is one of those big things that we expect to see droughts get bigger to be longer in duration. 

We expect places that are wet to get wetter. And so what I mean by that is when there is, say, a rainfall event, we expect to see a larger amount of precipitation occurring over shorter periods of time. So this can lead to flash flooding, for instance, or a tremendous amount of runoff because maybe the ground isn't readily available to absorb all of that moisture. So -- and we saw that. We saw that with the flooding in Eastern Kentucky. We saw that with the flooding in the St. Louis suburbs in the Dallas-Fort Worth suburbs this year. There were a number of places that had really significant rate flooding from rainfall events that were very intense. 

So not only are we theoretically saying these things are likely to happen. But we're seeing these things play out in our climate system. 

Esther Whieldon: This theme of wet areas getting wetter and dry areas getting drier, Karin said this trend is also playing out when it comes to wintertime. 

Karin Gleason: There are locations in the country that snowfall is still going to be very much a part of their normal weather from year-to-year and season, winter season to winter season. Certainly, mountainous locations are more apt to have more consistent snowfall. But locations, like I said, across the Northeast that aren't necessarily near the lake-effect snow regions, they have had a couple of abbreviated cold spells and cold snaps, but really not enough moisture to generate snowfall. And then even if they received snowfall, chances are it got warm enough after that cold spell that most of the best now probably would have melted. So any of the industries that kind of depend on snow for recreation of their livelihood, hopefully, they have ways of making snow. That would be sort of one caveat. 

But secondly, those industries really can take a big brunt of sort of the pain and the discomfort if you happen to have a warmer-than-average winter season or if you don't have that layering of those cold air blasts on top of significant moisture, which really is what generates the snow. Conversely, you have these locations down wind of our Great Lakes. And I think of Buffalo in the suburb communities of Buffalo, they had 2 really amazingly intense like effect snow events, one in November and one in December. And a large driver for that is having really warm -- Great Lakes -- so think about that in a warming globe. You go into the fall and the winter season with well water temperature that is above average. And so you have these warm lakes and when you do have these cold air outbreaks, think about the physics of cold air blowing over a warm lake. So the warm Lake has lots of moisture, clearly. And the difference in temperature between the cold air and the warm Lake causes tremendous amounts of convection or lift of air. So you have all this warm moist air that's lifting over the lake being blown across the lake and then dumping copious amounts of snowfall on the other side of the lake on the land. And that's basically what's happened in locations like Buffalo.

And so for instance, if you start out with a really warm lake at the beginning of the winter season, if that lake cools off more slowly, there are more opportunities for there to be lake effect snow further and deeper into the winter season. It's only when those lakes freeze over or get a crust on the top of the lake, which typically does happen in most years for most of the lakes. When that happens, that lake effect snow machine really comes to a halt because it's having contact with that liquid water from the lake that generates all that lake effect now. 

So there's the potential for these down-wind lake effect locations to actually have a larger portion of their winter snowfall come in the form of lake effect snow events because sort of that lake affects no season on average is likely to grow in length.

Esther Whieldon: That's really interesting. You wouldn't think of global warming as causing more snow for some areas, right? Like just inherently, I wouldn't logically 

Karin Gleason: And that's really an interesting point that you make because when we think about a warming climate, for every 1 degree of fair and height of increase in temperature, we have a 4% increased capacity to hold more water vapor, all right? So water vapor can be frozen or it could be liquid. 

So this is one of the reasons why we talk about there being more intense rain events, but there's no reason why in the wintertime, that doesn't mean that there's more moisture for snow. So when we have snowstorms, it's entirely possible that snowstorms could actually be filled with more moisture and therefore, actually end up being more intense or having more snow during single events. That's a distinct possibility. But you're right, it's not necessarily intuitive than in a warming climate. You would think, oh, does that mean we'd have more snow, you would think less because it's warmer. 

But what I can say is that we're still going to have cold air outbreaks. Winter is still going to happen. It just may not stay as cold for as long and locations that maybe had snow on the ground from, say, November or December until April or May, may find that, that pinched a little bit at both ends. You may only have snow on the ground for a more compressed period of time on a more consistent basis from year to year. 

Esther Whieldon: So how does -- what we're seeing in the U.S. fit with what's happening globally?

Karin Gleason: So as we mentioned, we saw above average temperatures in the U.S., and we actually had a number of parts of the year, especially in the West and in the South that had record heat waves. We also saw a tremendous amount of heat in other parts of the world. So for instance, the continent of Europe and Asia, they had their second warmest year on record in 2022. The U.K., France, Spain, Italy and some other Western European countries had their warmest year on record and their warmest year on record is longer than our warmest year on record. They've been around for a little bit longer than we have. 

There were significant heat waves in Japan in June, for instance, they have their warmest streak of hot weather since 1875. 

Looking at flooding, I mentioned flooding in Eastern Kentucky and near the Dallas area, St. Louis, Australia in February and March saw some significant flooding. China had its heaviest rain in 6 decades in the month of June. Pakistan in July and August had devastating flooding and there was record rainfall in parts of South Africa during the month of April. 

Drought is also not something that's just U.S.-centric. Certainly, we are concerned about drought for a number of reasons. There are water resource issues, but there's also agricultural concerns. And that is the same globally. 

We saw agricultural lands in Eastern China, East Africa, the Canadian Prairies, Brazil, Argentina, Western Europe, they had vegetative stress and low ground water and soil moisture. 

The Horn of Africa has been in a drought for quite some time. And according to some of the media reports there, they're enduring the driest conditions they've experienced in 4 decades and also are suffering from extreme food shortages. So when we think about the United States and we think about drought to a large extent, we think about inconveniences or the prices for things are going to go up. But in other parts of the world, they're not nearly as resilient as we are. And so the thought of having literally food shortages because of drought is a very frightening prospect.

Esther Whieldon: So as you can hear, Lindsey, climate change is creating some resiliency challenges for infrastructure, food security and other aspects of society in the U.S. and around the world.

Lindsey Hall: Please stay tuned as we continue tracking how this discussion around funding adaptation for climate is evolving.

Thanks so much for listening to this episode of ESG Insider and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.  

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