When a hurricane caused flooding at a coastal industrial facility in Georgia, USA, it damaged buildings and took out the power. A forced evacuation shut down the plant for several days, resulting in significant losses.
Was this an isolated incident or would a changing climate make storms like this more frequent and potentially more ferocious? And what would have happened if the hurricane had coincided with high tide; how much worse would the damage have been? What are the risks and what can be done to mitigate them?
Climate due diligence
Ramboll was called on to perform a climate risk assessment as part of pre-acquisition due diligence. We looked at the potential impact on the asset and site operations including risks to infrastructure, threats to the availability of vital resources such as water and power, as well as supply chain, logistical and operational impacts from extreme weather.
Current climate risk
We started by assessing the risk of storm surge for coastal sites, looking at the effect of hurricanes of different strengths. This, combined with existing flood risk maps, showed that there was the potential for serious flooding even under the present-day climate.
But what of the risk in the future?
Historical tidal gauge data shows that the sea level near the site is rising. The US’s National Oceanic and Atmospheric Administration (NOAA) projects that the sea level is expected to keep rising throughout the 21st century. The amount the sea rises depends on greenhouse gas emissions and the rate of melting of ice sheets in Greenland and Antarctica, but in even the best-case scenario, climate change is projected to cause ongoing sea level rise.
Sea level rise projections were used in conjunction with inundation and storm surge hazard maps to estimate the range of years when flooding would become a threat to the facility. The findings showed significant future risk to the site.
Add in temperature and rainfall predictions
Projections of mid-late 21st century temperature and precipitation were also reviewed. Climate model data showed that the site is projected to experience increasing temperatures as well as heat wave frequency by the end of the 21st century. Mean rainfall is expected to decrease in the region, but an increase in the heaviest rainfall events most likely to cause flooding is projected.
Because facility operations depend on a steady supply of fresh water, we also looked at projections of water availability from World Resources Institute’s Aqueduct Model and the National Climate Assessment (NCA). The NCA projects that dry spells are expected to increase and that the prevalence of long term droughts will increase in the site region. Increasing temperatures are likely to increase the demand for water, whilst simultaneously making it less available. The intrusion of salt water into freshwater rivers and well fields caused by rising sea levels will also reduce the availability of water.
In a changing climate, asset management and investment decisions based solely on past data may underestimate risk. However, climate change risks can be evaluated and successfully managed alongside other business risks. The most important finding of our work was the long-term potential for serious flooding at the site. This risk represented a material issue for the transaction and indicated that detailed, site-specific hydraulic modelling should be undertaken to propose adaptation measures that reduce inundation risk. The goal of this analysis is to increase value during the ownership period by identifying cost-effective measures that increase resilience to present-day extreme weather, as well as future climate risks.