for reducing environmental risk will put businesses
on their way to effectively coping with the heat.
The challenge of implementing these adaptations
has an added urgency because firms in the region
will likely have to act on their own. While close to a
billion dollars are invested annually in Latin America in the reduction of carbon emissions, known as
mitigation, two of the leading funds established
by industrialized countries to finance the region’s
adaptation—the Special Climate Change Fund and
the Least Developed Countries Fund—are either
empty or currently unavailable for the hemisphere.
An agreement to distribute a third source, the Adaptation Fund, was reached in Bali in December 2007,
but the details remain undetermined.
Kevin Watkins, the director of the United Nations
Human Development Report Office, told The New
York Times in April 2007 that developed-world financing of adaptation in vulnerable countries “borders on
Some Latin American managers are in fact already
beginning to adopt new strategies. But avoiding economic disaster will require a lot more advanced planning across diverse sectors of the economy. Extreme
climate events are only one of the warming-related
hazards likely to affect bottom lines. According to the
experimental model created by Yale economist Robert Mendelsohn, Latin America will face between $49
billion and $119 billion in annual losses from climate
change by 2100, depending on the amount of global
warming. The areas facing the greatest damages are
agriculture, energy and access to water.
The following approach focuses on cost-effective
adaptations that offer future savings, but it also concludes with big picture proposals for how firms that
operate and invest in Latin America can respond to
the climate challenge. Severe global warming resulting from business-as-usual emissions trends would
Sasha Chavkin is a Middlebury Fellow in
Environmental Journalism. A 2005-2006 U.S.
Fulbright Fellow in Lima, Peru, he was a regular
contributor to the Peruvian news magazine
Caretas, and his work has appeared in The Nation ,
Latinamerica Press and Quehacer.
be devastating to both society and the private sector, inflicting losses over the next two centuries that
are projected by noted British economist Sir Nicholas Stern to equal 5 percent to 7 percent of global per-capita consumption—and climbing to a shocking 20
percent per capita in losses when adding non-market
impacts such as disease. Managers that adapt in ways
that protect their communities and their planet will
ultimately do well by doing good.
A smart response to climate change would also
present some unique opportunities for Latin American businesses. Latin America produces the least
carbon-intensive energy of any developing region in
the world, and regional firms are therefore well-positioned to seize a competitive edge in global markets
where the rising cost of fossil fuels and the increasing
value of environmental sustainability have become
major new factors in trade.
How? Below are six ways that hemisphere businesses can take the heat in stride.
Study the Risks
The first step in adaptation is understanding the
nature of the threat. Climate change exposes Latin
American businesses to a range of expenses varying
from the mundane (air conditioning) to the dramatic
(hurricane evacuations of staff). However, the most
widespread risk that businesses can anticipate fall
into three categories: energy costs, as the prices of fossil fuels rise from regulation and scarcity; water availability, as changes in rainfall, higher temperatures
and glacial melt disrupt access to water; and coastal
damage, as rising sea levels place shoreline structures
in the path of floods, storm surges and erosion.