Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

Accounting for climate risks

In 2019, I bought an apartment in a Dutch town, which is almost 30 meters above sea level. At the very least a third of The Netherlands is below sea level (Wiki-1, Wiki-2). Some day that will hurt; not now. My decision was a conscious choice. Climate change is a geological fact; not an opinion.

My decision was rooted in my risk management. I have a lower risk appetite than others. I doubt that climate change is a factor in Dutch real estate decisions. In my situation, its impact is more likely to be positive than negative. Near the equator, its impact can no longer be ignored.

It’s important to realise that warming water has (much) more impact near the equator. When water freezes, its density will increase. Hence, your outside plumbing may burst. When water thaws, its density will decrease. However, near the equator, the density of (warm) water increases; see my 2019 blog.

Hence, the recent Economist article: Accounting for flood risk would lower American house prices by $187bn (and my blog).

The Netherlands has some 8 million houses (CBS) with an average value of 300k (CBS). The total Dutch residential real estate value would be some 2,400 billion euro. I suppose at least 40% is below sea level. Hence, 960 billion euro, which is much higher than the American estimate.

At this moment, the probability of default (PD) of that exposure at default (EAD) translates in an expected loss (EL) of zero. It may takes decades – or even centuries – before such risk assessments will change but they will; either in time or in space (ie, geographical location, like the USA).

The financial term stranded assets will get a sibling: submerged assets.

My 2016 blog The Great Flood (16,000 BC – 4,000 BC) already provided a list of ancient submerged assets (eg, Bimini Road).

We easily forget that global sea levels have already risen by +120 meters (or +400 foot) since the Last Glacial Maximum.

“For most of history, man has had to fight nature to survive; in this century, he is beginning to realize that, in order to survive, he must protect it.”

A quote by French naval officer, oceanographer and filmmaker Jacques-Yves Cousteau (1910-1997)

The Skies Will Break (2016) by Corinne Bailey Rae
artist, lyrics, video, Wiki-artist, Wiki-album+song

Note: all markings (bolditalicunderlining) by LO unless in quotes or stated otherwise.

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1 Comment

  1. A n A

    I SUGGEST YOU AN OPPORTUNITY.. in ROMANIA (TRANSYLVANIA REGION) THERE ARE VILLAGES WHICH WERE ABANDONED BY ROMANIAN GERMANS, SVABI ETC (AFTER WW2). THERE MANY GERMANS, FRENCH … DUTCH PURCHASED HOUSES, LANDS AND MOVED TO ROMANIA, DEFINITELY. STUDY THIS OPPORTUNITY, ESPECIALLY THOSE WHO HAVE HOUSES BELOW SEA LEVEL..IN THE NETHERLANDS.

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