By Thomas Kostigen
The money you invest in a stock’s IPO or secondary offering flows into company coffers, and that’s why where a company is based is important. When the physical operations of a corporation are jeopardized so too may be at risk its finances.
Verisk Maplecroft, a global risk consultancy, has released a list of the world’s riskiest cities. It’s worth checking to see if any of the companies in which you’re invested are located in these dangerous locations, and what exposure they, and in turn you as a shareholder, face.
Asia is where 99 out of 100 of the riskiest cities on earth are based. Lima, Peru is the only non-Asia city on the top 100 list, although Mexico City and Los Angeles aren’t far behind.
What makes a city risky, according to Verisk Maplecroft, are high or extreme risk for a combination of pollution, dwindling water supplies, extreme heat stress, natural hazards, and vulnerability to climate change.
“With rising emissions driving weather-related risk and populations growing in many cities across the developing world, the risks to citizens, real assets, and commercial operations are only going to rise,” the report says. “Of course, companies and investors with a focus on assets such as real estate cannot just pick up and relocate to a ‘safer’ city. And given our analysis shows no cities are entirely risk free, it is vital that organizations conduct granular assessments of environmental risk so they are best placed to overcome disruption from chronic climate risks and significant natural hazard events.”
It’s simple enough to learn where every company in your portfolio is located by doing a simple internet search, or by calling up its ticker symbol on a financial site. There, everything from headquarters to revenue is listed. It’s not only worth looking, it’s worth mapping your investments. Financial advisors can do this for you, if you have one. And they often do map in order to assess the risk of externalities, as these risks are known, on companies.
The Securities and Exchange Commission is also mandating that companies disclose their risks to climate change. Externalities will surely play a part in that. All this is to say that Verisk Maplecroft’s mapping of city risks should be of increasing concern and interest to the financial services community.
“With investors and regulators increasingly concerned about broader ESG issues, organizations unable to account for the full spectrum of environmental threats and impacts will face some difficult conversations,” says Will Nichols, the head of environment and climate change research at Verisk Maplecroft.
The top riskiest cities in the world are:
- Jakarta, Indonesia
- Delhi, India
- Chennai, India
- Surabaya, Indonesia
- Chandigarh, India
- Agra, India
- Meerut, India
- Bandung, Indonesia
- Aligarh, India
- Kanpur, India
The full cities-at-risk report can be found here.
There’s an old Public Service Announcement that goes, “It’s 10 pm, do you know where your children are?” Perhaps the business and investment community could have their own take on that safety inquisition: “It’s the opening bell, do you know where your investment dollars are?”
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
