In 2020 alone, close to 60,000 unplanned wildfires seared through more than 10 million acres of US land. These shocking figures are not even the worst instance recorded in a single year since 1960, taking second place, however they do provide a vivid indication of just how fast wildfires can spread around the country. Since the year 2000, an average of 7 million acres have burned each year. Wildfires are unequivocally occurring more regularly and on a wider scale. In one way or another, it all comes down to climate change, whether that’s the longer seasons we’re experiencing, hotter weather or changes to meteorological patterns. Wherever you are in the world, wildfires are now a significant risk to your health, home and livelihood, these risks must be assessed and managed as best we can. Experts are now also assessing the impacts of fire season on our economy, with a study estimating that for every day of smoke exposure from a wildfire, earnings are subsequently reduced in that community by around 0.04% over a period of two years. Let’s take a closer look at these impacts on a local and national scale.
Impact on Human Health
Health is always the primary concern when dealing with a wildfire. Any loss of life or even serious injuries resulting from wildfire are tragic and have a marked impact on not only the community but the economy. In 2019, fires in the US were responsible for 3,700 deaths and around 17,000 injuries. These deaths and injuries are traumatic for those involved, but this impact can also send shockwaves through the local economy. Those affected may be left unable to work permanently or for long periods of time, closing local businesses. In smaller communities, the area can then be left without a much needed resource within the community, and skills shortages can mean many roles are hard to fill. These effects are not short lived. Air pollution is another major impact of these prolific wildfires, it is not only those in close proximity who are at risk from breathing in the smoke but also inhabitants of surrounding towns and regions. Wildfires can have a negative effect on the air quality in a large radius, at times extending to distances of thousands of miles. This means that even individuals who are not directly involved in the fires can experience health repercussions, therefore impacting their local economies and livelihoods.
Impact on Property
Property is also at a high risk of damage from wildfires, with fires occurring in structures every 65 seconds across the US. The cost of damages incurred by these wildfires can stretch to billions, with the largest wildfires causing over $1 billion in damages. The costliest wildfire on record caused over $10 billion in damages back in 2018. Damage to property has knock-on effects for communities and the economy, resulting in people being displaced from their homes, businesses lost and high costs for insurance companies. Interestingly, employment and wage levels can sometimes increase during fire season, as activities linked to fire suppression can generate jobs in the area. This may seem like a silver lining and a chance for the community to build themselves back up, but in reality these wildfires are mirroring the dynamics of seasonal employment, where people are forced to work twice as hard for half the time.
Impact on Tourism
Wildfires not only destroy local homes and businesses, but they can wipe out entire tourist complexes, from hotels and holiday lets to caravan parks and campsites. The community isn’t only subject to the losses occurring during the time of the wildfire and clean up/recovery period, but for the entire season and years to come. Most people will understandably not return to the site of a traumatic experience with fire. People will avoid entire states or national parks if they hear that fire is present, despite only a small area being affected.
Impact on the Stock Market
The stock market is also heavily affected by these global phenomena, with some companies more susceptible to damage than others.
In Australia, in 2018, Pacific Gas and Electric (PG&E) received the hardest blow. Before the bushfires, their stocks were trading almost $70 and the company’s worth was around 36 billion dollars. After the wildfires started spreading on October 8th, their stocks took a massive blow and got to around $55.
A similar thing happened to Southern California Edison. Before the wildfires, Edison’s stock was at around $80 and the company was valued at 26 billion dollars, but after the fires their stock price plunged 16% makins shareholders worried that they would be the ones forced to pay damages.
A report on the California wildfires situation stated:
“A sudden revision of market participants’ perceptions about climate risk could trigger a disorderly repricing of assets, which could have cascading effects on portfolios and balance sheets and, therefore, systemic implications for financial stability.”
Length and Breadth of Wildfire Damage
It is clear to see that the impacts of wildfires go beyond surface level. The sheer breadth of wildfire impact can be hard to access, given that it impacts a huge geographic area and so many industries. In a recent study by University College London, the 2018 California wildfires are estimated to have cost the US economy a total of $148.5 billion. The study also ascertains that around one third of these costs occurred outside of the state. We cannot underestimate the spread of damage from wildfires, nor the rising intensity and frequency of these catastrophic fires.
What Investors Have to Keep in Mind
Seeing as how much impact the climate has on the stock market, it’s important that investors stay up to date with what is happening around the globe regarding the state of the planet.
The damage inflicted by wildfires in particular highlights the need for investors to be aware exactly which industries and businesses are most susceptible to risk caused by climate change or by measures to reduce emissions, so research on the topic and staying up to date with global news is essential.
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