Here at CDN we have a fearless prediction that will help you manage your investments, decide how to vote, arrange your personal affairs and grow your business. Namely: in the days and years to come, stuff will happen. You’re welcome. If you want more precision, well, we incline to the view that if the government predicts it, you can usually bet on the opposite occurring. Which might help if your job now requires you to forecast something called “climate risk.” The New York Times celebrates the U.S. Securities and Exchange Commission piling a Pelion of miscalculation on an Ossa of misplaced certainty by forcing corporations to calculate it along with something called “nature risk.” They don’t know what next week’s weather will bring, whether China will invade Taiwan this year or whether Vladimir Putin is going to die tomorrow. But they now must determine what their data centre will do to an Arizona aquifer in a decade.

We understand that this kind of approach has two comprehensible roots. One is the legitimate human fear of uncertainty, since nature, history and the universe are on the whole more likely to throw us beanballs than surprise parties. And the other is the amazing success of science in the last half-millennium in applying linear algebra to physical substances and interactions and mass-producing cars and antibiotics and putting people on the moon. But math has its limits, and so does certainty. Unlike arrogance and stupidity.

In her “Climate Forward” piece in the Times, Manuela Andreoni observes that:

“Reporting the corporate risks of climate change is increasingly becoming a required part of doing business. This month, the Securities and Exchange Commission made such disclosures mandatory for public companies in the United States, following the lead from the European Union and California. But climate is not the only aspect of the natural world that is being transformed by human activity.”

Indeed it is not. And sometimes our transformations of nature are foolish, ugly and even highly destructive. Humans have indeed sometimes paved paradise and built a parking lot, hunted species to extinction for amusement as well as for food, polluted rivers and fouled our own nest. But what is also true is that these compulsory disclosures are not worth the screen they are displayed on.

It's not because the companies are lying, at least not on purpose and with malice aforethought. Because nobody knows what will happen, what others will do, or how their own actions will interact with those of others, and yet the law requires them to pretend to know.

As Alex Epstein objected:

“The purpose of ‘disclosure,’ and the reason for requiring it, is that there are certain facts a company knows about, including its current plans for the future, that are material to investors making an assessment of its future prospects. E.g., if a CEO has stage 4 cancer.”

They even know some things about climate, for instance that they own beachfront property that would go under if the seas rose. But they don’t know, any more than anyone else, whether the seas will rise. Thus, he writes:

“The ‘climate-related risks’ the SEC now requires companies to disclose are not facts the company has distinct access to but instead opinions about climate science and climate economics – subjects most companies have little-to-no distinct knowledge of.”

As bureaucrats and politicians will, “SEC Chairman Gary Gensler swears that the SEC isn't looking for any particular opinion: ‘We’re agnostic with regard to climate risk.’” Riiiight. So try saying in your disclosure that humans aren’t warming the Earth, and that the recent mild natural warming was benign and will be if it continues, so profits will rise, and see what the SEC charges you with. As Epstein adds, “the Biden SEC’s examples of ‘climate-related risks’ involve rapid, exclusively-negative climate changes” which he proceeds to quote:

“Similar to the rule proposal, ‘acute risks’ is defined as event-driven risks and may relate to shorter-term severe weather events, such as hurricanes, floods, tornadoes, and wildfires. ‘Chronic risks’ is defined as those risks that the business may face as a result of longer term weather patterns, such as sustained higher temperatures, sea level rise, and drought, as well as related effects such as decreased arability of farmland, decreased habitability of land, and decreased availability of fresh water.”

What of the risk of bumper crops due to pleasant and more stable spring and summer conditions as in the Medieval Warm Period? Not a hope. Thus we also read that:

“Europe is not prepared for the rapidly growing climate risks it faces, the European Environment Agency (EEA) has said in its first risk assessment. From wildfires burning down homes to violent weather straining public finances, the report says more action is needed to address half of the 36 significant climate risks with potentially severe consequences that it identifies for Europe. Five more risks need urgent action, the report says…. It says the most pressing risks – which are growing worse as fossil fuel pollution heats the planet – are heat stress, flash floods and river floods, the health of coastal and marine ecosystems, and the need for solidarity funds to recover from disasters.”

Invest in our long-term growth portfolio for the retirement you will be incinerated before reaching.

As we’ve observed, lots of people keep using the drastic RCP8.5 climate breakdown scenario as though it were probable. And if you evaluate your company’s future 50 years out based on it, well, better sell your bonds. But RCP8.5 is one thing even we at CDN can say for sure won’t happen.

If you retreat to more solid ground, you’re still in the mire, because we don’t know what the climate would do without human influence. No, really. The models think it would be more or less static because they were programmed to. But the actual history of the planet says it will swing about wildly. The balance of probabilities says the Holocene warm interglacial will yield to another massive advance of the ice within, well, you know, a few centuries or millennia. But when, and whether it will first get warmer, is not something you can calculate.

We also don’t know what human influence will do. The models say CO2 will cause warming because they’re programmed to. But even if they’re half-way right to begin with, how much? Estimates of “ECS” or “Equilibrium Climate Sensitivity”, the absolute increase in degrees Celsius from doubling atmospheric CO2, vary considerably. And where’s the saturation point at which ECS drops precipitously to near zero? We don’t know.

Here at CDN we’ve repeatedly argued that in the face of all sorts of climate uncertainties including what governments will attempt and how badly it will fail, the crucial thing is to maintain resilience. We do know that humans are remarkably clever, if also remarkably stupid, and the former predominates to a startling degree when we face practical challenges. If, another key lesson of history, we are free to improvise rather than being regimented.

In a classic passage from his 1792 book Travels in France, quoted by John Stuart Mill, Arthur Young wrote:

“The magic of property turns sand into gold.... Give a man the secure possession of a bleak rock, and he will turn it into a garden; give him a nine-year’s lease of a garden, and he will convert it into a desert.”

Our governments nowadays, of course, do the latter. They hedge property in with ever more rules and regulations, including the forced disclosure of information its owners cannot in principle possess, on the basis of which to create even more rules and regulations that stifle ingenuity and even common sense.