A man walks through floodwaters in New Jersey in the aftermath of Hurricane Sandy, a storm, many fear, that was a preview of the high costs of climate change.
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By Vivienne Walt
December 7, 2015

At a black-tie event in an opulent ballroom late in 2014, a grim figure at a podium warned of the “catastrophic impact of climate change.”

“While there is still time to act,” he admonished, “the window of opportunity is finite and shrinking.”

A celebrity environmentalist’s jeremiad? Hardly. The speech, made in front of a spellbound audience of insurance executives in London, was delivered by one of the financial world’s most sober figures: Bank of England governor Mark Carney. His message was simple: Climate change is coming, and it’s very bad for business.

As more than 100 heads of state converge in Paris in December for the 2015 United Nations Climate Change Conference, business leaders will play a larger-than-ever part in the discussions. Executives were once hesitant to impede manufacturing efficiency or dampen consumption. Now nine out of 10 of them see climate change as an urgent priority, according to a survey by Accenture. “The first reaction of Big Business is denial,” says Philippe Desfossés, CEO of the $25 billion French public pension fund ERAFP. But denial has become increasingly difficult as environmental costs mount. “This is not about morals whatsoever,” Desfossés says.

So far the insurance industry has led the charge—and with good reason. Early on “there was a gut feeling that the patterns of natural catastrophes were changing,” says Peter Höppe, director of Geo Risks Research at Munich Re, which first sounded the alarm in 1973. Since then its message has gained resonance. The number of weather-related events covered by insurance has tripled since the 1980s, and the cost has jumped from $10 billion annually to some $50 billion.

It’s not just the insurance industry that’s taking note. Even more so than wars or subprime loans, a wild-card climate calamity could put the entire global economy in a tailspin. At the same time, divestment campaigns have prompted cities and governments to increasingly dump fossil-fuel stocks. And New York is investigating whether Exxon Mobil misled investors by downplaying climate risk—a case that could cost the company substantially.

But economic self-interest alone may not be enough to spark real progress, particularly because the worst effects of climate change are still a generation away. Leaders can’t afford to wait. Says Carney: “Once climate change becomes a defining issue for financial stability, it may already be too late.” 

A version of this article appears in the December 15, 2015 issue of Fortune with the headline “The C-Suite Climate Converts.”

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