Warren Buffett discounts climate exposure, likens risks to Y2K

Source: Benjamin Hulac, E&E reporter • Posted: Wednesday, March 2, 2016

Billionaire Warren Buffett this weekend told his company’s shareholders that they shouldn’t worry about the firm’s exposure to climate change.

In a letter to Berkshire Hathaway Inc., one of the world’s biggest insurers and a significant insurer of catastrophic damage, Buffett wrote that personal concerns about climate change should not be confused with business risks.

“As a citizen, you may understandably find climate change keeping you up nights,” Buffett said, suggesting that investors move if they live in a low-lying region. “But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.”

Buffett wrote the letter, published Saturday, in response to a shareholder resolution requesting that the company produce a report on climate change “dangers” and how Berkshire Hathaway plans to respond to climate risks.

“It’s understandable that the sponsor of the proxy proposal believes Berkshire is especially threatened by climate change because we are a huge insurer, covering all sorts of risks,” Buffett wrote.

Buffett said the author of the proposal could fret that property losses will climb due to different and increasingly destructive weather patterns, but he explained that insurance policies can be updated and recalibrated to reflect new and emerging risks.

“Insurance policies are customarily written for one year and repriced annually to reflect changing exposures,” he wrote.

Others taking climate threats seriously

The Nebraska Peace Foundation, a nonprofit advocacy group, filed the resolution, which company management opposes.

The world’s most famous value investor weighed in on climate science, too.

“It seems highly likely to me that climate change poses a major problem for the planet,” Buffett said. He likened climate change forecasts to “the dire predictions of most ‘experts’ about Y2K,” the theory that electronics would malfunction in 2000 and incite serious panic.

But the slim likelihood that climate change is not real and destructive shouldn’t forestall action, he said.

“It would be foolish, however, for me or anyone to demand 100 percent proof of huge forthcoming damage to the world if that outcome seemed at all possible and if prompt action had even a small chance of thwarting the danger,” the letter reads. “If there is only a 1 percent chance the planet is heading toward a truly major disaster and delay means passing a point of no return, inaction now is foolhardy.”

The company’s annual shareholders’ meeting is scheduled for April 30 in Omaha, Neb. Every year, investors pick through Buffett’s letters for sage advice from the famed financier, nicknamed the “Oracle of Omaha.”

Other major corporations, banks and experts, however, do worry about climate hazards.

Lloyd’s of London, another insurer with a global business, stress-tests its portfolio against climate change-related risks, such as a massive depletion of crops and drinkable water, droughts and flooding (ClimateWire, Feb. 18).

Banks and professional investors like Goldman Sachs Group Inc., State Street Global Advisors and BlackRock Inc. — the largest asset manager in the world — have each said climate change is a potent and pervasive threat that will trigger financial costs (ClimateWire, Jan. 29). And 750 economics experts, in response to a World Economic Forum survey about the greatest financial threats the world faces, recently named climate change the top risk to the global economy.