Trouble at Both Poles

A similar melting process is at work in Greenland, whose ice sheet contains enough freshwater to increase the global sea level by another 23 feet. Here, too, the findings are so new and surprising that scientists have had a hard time keeping up with them. In fact, last year’s Nobel Peace Prize-winning report from the Intergovernmental Panel on Climate Change—which was subject to an extensive but time-consuming peer review—is already out of date.

In that report, the IPCC projected that neither Greenland nor Antarctica would contribute much to sea level rise in the 21st century. In the case of Greenland, it was thought that its mountainous terrain would lock ice mainly in place. Water evaporating off the ice’s surface would fall into the ocean as precipitation—a slow process to be sure.

On this basis, the IPCC projected that only between eight inches and two feet of sea level rise would occur by the end of this century, mainly from thermal expansion of the ocean’s surface as the global temperature rises. Glacial melting from Greenland or Antarctica would literally be drops in a bucket, or so the IPCC thought.

Now scientists have discovered that melt-water is pooling on Greenland’s icy surface and finding its way into deep crevasses and caverns that cascade down to the bedrock below. The result is that Greenland’s ice sheet is melting from below as well as above. More significant, the deep melt-water is dislodging ice from the bedrock, acting like a lubricant that allows the entire ice sheet to slip inexorably toward the sea.

Taken together, Greenland and West Antarctica already are depositing enough freshwater into the ocean to drain the equivalent of Lake Ontario every 18 months. And this rate of melting is accelerating—perhaps irreversibly—so that the amount of sea level rise in the 21st century may well end up being measured in several meters rather than in feet and inches. Rajendra Pachauri, the head of the IPCC, concedes this "frightening" possibility and says it will be examined in the group’s next report.

Awash in Risk

The consequences of such rapidly rising sea level would be devastating for investors. Trillions of dollars of coastal infrastructure could be laid to waste—airports, highways, power plants and water treatment systems, not to mention millions of homes and commercial properties.

Are investors and bankers paying attention to this important news? Amidst the enormity of the current sub-prime lending crisis, it’s easy to see how an issue like this might get lost in the wash. Yet these two problems bear some eerie similarities—namely that the financial community is failing to properly account for underlying risks to a huge class of assets, with tremendous repercussions for the global economy as these risks play out.

While the bad news is that sea level rise ultimately could affect a much larger share of property valuations than the sub-prime lending crisis, the good news is that it is not too late to head off this looming environmental and investment calamity. New private and public sector alliances can come together to make key decisions on building standards and land-use regulations in coastal areas, ensuring energy efficient and disaster-prone retrofits of existing infrastructure, and providing supportive insurance coverage. Most of all, a global consensus needs to form around the imperative to bring down greenhouse gas emissions and wean our dependence on fossil fuels—balancing this energy challenge against the emerging threat to our coasts.

Adaptation vs. mitigation has always been a huge undercurrent within the global warming debate. Now—with the latest findings from Antarctica and Greenland welling to the surface—it is becoming clear that both adaptation and mitigation strategies will be needed, and help shape some of the most important investment decisions of the 21st century.

* Doug Cogan is also the lead author of the 2008 report, Corporate Governance and Climate Change: The Banking Sector, commissioned by the Ceres investor coalition.

*This commentary expresses the views of the author alone and does not purport to represent the views of RiskMetrics Group or its clients.