20 May 2020

The COVID and climate conundrum

Harold Hutchinson

Head of Research

Some commentators compare COVID-19 with climate change risks. There are difficulties with this narrative. Firstly, climate change will principally be a killer in the future of today’s young and their descendants, not today’s old. Secondly, there are rather different types of uncertainty generated by viruses and the climate that are important to distinguish.

By way of introduction, we should be grateful for our superb UK statisticians, a tradition we owe to City merchant John Graunt. One silver lining from the era of the Great Plague in London was his analysis of parish Bills of Mortality to tabulate the causes of death. The industry has developed steadily ever since. Death tables are now dutifully recorded by our Office for National Statistics, an essential part of our struggle against the coronavirus.

 

With the rich data sets available nowadays, Professor David Spiegelhalter from Cambridge has re-iterated recently the ‘normal’ risk of death for the general public from any cause, as we grow older. Simplifying slightly, from about the age of 10, your risk of not reaching your next birthday grows exponentially, increasing at a rate of approximately 9% each year. In turn, that implies the average risk of death doubles every 8 years. Those are the Facts of Death (FOD). Now, before you race off for the gin bottle, as the risk is very small in the early years of life (less than 1/10,000 for a 10-year old), it is only as you reach ripe old age well beyond 80 that the exponential effect compounds seriously against you – we all pass on eventually.

The solution is to accelerate our investments in clean energy and the environment in a sustainable way

Now, if infected by COVID-19, the evidence available today suggests the risk of death follows a similar exponential gradient to the FOD – very small if young and only more troublesome when you are well over 80. Conclusion – COVID-19 is a particularly grim reaper of the old. We have put the economy on hold to suppress this - an honourable economic gift from the working population to the elderly.

 

However, this raises an immediate ethical issue - if we are prepared to shut down the economy to protect our ascendants, why would we not do likewise for our descendants? They will face the existential risk from chaotic tipping points in the climate. The risk perspective here goes beyond virus-linked individual odds, to the danger of human extinction altogether. Thankfully, such an eventuality remains remote today. The bad news is, however, that the threat also rises exponentially, the more we ‘force’ the climate by increasing the stock of greenhouse gases (GHGs) in the atmosphere – a simply reckless planetary gamble.

 

So, we seem happy to make fundamental changes to our lives to suppress COVID-19 and protect the elderly. However, we do not appear to have the same commitment to our children and grandchildren, judged by our current environmental policies. If we admit an inconsistency here that needs to be corrected, we had better start thinking about how to protect our environment and our offspring. On the assumption that a decades-long lockdown is not desirable, the solution is to accelerate our investments in clean energy and the environment in a sustainable way…and pretty damn quickly at that!

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The blog does not aim to give investment advice, but is designed to afford relevant longer-term context to investors, encouraging a broad perspective where uncertainty is high and a spirit of learning is important. The views expressed are those of the author, not those of Investec.