Why the spectre of ‘climate black swan’ events is haunting global investors
As the threat of a super El Nino disrupts Asia’s food market, global banks warn investors to prepare for sudden, unexpected climate shifts
As a potentially record-setting El Nino threatens to push up global food prices – with an impact as great as the Iran war – some global investment banks have warned investors to pay more attention to the risk of “climate black swan” events: sudden, unexpected shifts in the climate with the power to upend markets.
The warning comes as the threat of a super El Nino disrupts the global rice market, as major Asian importers stockpile grain in anticipation of potential shortages. The trend could be creating the conditions for a renewed food-price shock, HSBC warned in a report published on Monday.
“Geopolitical and weather risks are colliding in Asia’s rice market,” HSBC economists Ines Lam and Frederic Neumann wrote.
The US National Oceanic and Atmospheric Administration has said there is an 81 per cent probability of a “very strong” El Nino developing between October and December, an event that could rank among the largest since records began in 1950.
It also sees a 97 per cent chance that El Nino conditions will persist into early spring 2027.
El Nino typically brings below-normal rainfall to parts of South and Southeast Asia. India’s cumulative southwest monsoon rainfall was already more than 20 per cent below its long-term average as of July 15, according to government data. In May, the Philippines warned that a severe event could reduce rice production by about 700,000 tonnes.
Importers are moving to secure supplies before shortages emerge. Malaysia has extended its rice-reserve target from three months to nine months and plans to increase stocks to 300,000 tonnes from 200,000 tonnes, a government minister said in April, according to the national news agency Bernama.