11/26/07Will climate change affect you?

If anyone can avoid the impact of global climate change, the chances are they are already living on another planet. For the rest of us, there are financial implications that need to be considered.

Climate change - whether you accept that it is man-made or not is certainly with us. You need only look at the news to see stories of devastating extreme-weather events happening throughout the world, with what appears to be alarming regularity.

In the UK, while winters seem to be shorter and less extreme, the summer (which was certainly late starting) was preceded by unseasonable flooding, and we can expect matters to get worse; especially if the Gulf Stream, which warms us for most of the year, weakens or dies off altogether.

There are likely to be a number of ways in which this will hit family finances. Not least of these is that most families are likely to face increased home insurance, because companies will seek to recoup the massive cost of claims they are now having to meet. The principle of insurance is that the losses of the few are paid for by the many; if claims grow in number and cost, premiums must rise.

However, there is also the threat to businesses and employment, caused by growing numbers of interruptions to trade resulting from poor weather. Although there is insurance that helps businesses to recover from disruptions caused by floods and similar events, this cannot really cover the resultant stress and additional workload on employers and employees alike.

Conversely, there are some potential benefits for those who are prepared to take advantage of them. For example, new investment opportunities exist in respect of firms set up to meet the need to fight global warming. These include the recycling sector and alternative energy.

In the latter case, the rising price of oil (which, despite a fall during the second half of last year, has bounced back close to record levels during 2007) could eventually provide much needed impetus for the development of viable alternative sources of energy. This is important for a number of reasons. Firstly, burning any fossil fuel simply contributes towards global warming. Secondly, oil is, in any event, a finite resource; it will not last for ever. Thirdly, reliance on oil means increasing dependence on imports, as North Sea resources diminish.

High interest rates in the UK are helping to keep the domestic cost of fuel artificially low because the pound is strong. Unfortunately, this also makes it more difficult for exporters to compete on world markets, which - together with high import levels - is undoubtedly damaging to our domestic economy.

The situation is by no means all doom and gloom. The UK economy is part of an integrated global one and we need to find new ways to benefit from this.

Supporting new "green" businesses could well be one of the solutions both to world challenges and the need of each one of us to provide for our own financial future.