Why Amazon’s Long Island City Plans Should Have Considered Climate Risk

When Amazon was turned away from its Long Island City dream by angry New Yorkers, the company narrowly skirted a bigger issue – the impact of a climate change event that even Amazon is not big enough to get away from.

After all, it’s called Long Island for a reason: in the event of a volatile weather event such as a superstorm, evacuation of all of those working folks whose welfare about which local protesters were so concerned would have been tough. They would all have had to traipse through Manhattan or Connecticut to get out of harm’s way (with much of Manhattan and Connecticut’s populations traversing the same terrain).

Considering that Amazon is planning to be around for the long haul, it seems prudent to look at climate risk criteria in their site selection. Settling down in a place that will likely be partially underwater by 2050 is not prudent. But with all the other risks that companies need to evaluate, what to do about this relatively new vector?

In the U.S., corporate risk managers should turn to free open source tools like the Urban Adaptation Assessment (UAA) created by researchers at the University of Notre Dame. Faster than you can select your kid’s college comforter on Amazon Prime, you can see climate vulnerability assessments, data and graphics for 270-plus cities that will inform these critical decisions. For each city, UAA provides metrics for vulnerabilities related to flooding, extreme heat, extreme cold, drought, and sea-level rise, as well as the city’s readiness to adapt.

While Amazon evaluated measures like a metro area of more than one million people near an international airport with a stable and business friendly environment where there is potential to attract strong technical talent, they missed this risk that investors and global leaders are increasingly working into their decision making.

For a risk manager that gets push back that climate risk is something the firm can build its way out of, offer up that that is true – asset level resilience can be bought. But recall that those new soaring office and hotel buildings in South Boston’s Seaport District (where Amazon is expected to house 2,000 workers) with their inflatable and storable sea walls were no match for the March 2018 Nor’easter that surged onto streets throughout the seaport. By the way, UAA gives Boston good scores for its existing adaptive capacities but notes a flood event there could cost upwards of $1.5 billion.

So what about Amazon’s Northern Virginia metro area choice? Using NOAA sea-level rise projections, the Urban Adaptation Assessment makes plain that the District of Columbia could expect a 1.2-foot inundation along the Potomac in 2040 with costs approaching $155 million per foot of sea level rise. For Alexandria, the Potomac and other waterways could rise as high as a foot, with damages up to $25 million.

And Amazon is not the only one who cares about its risky choices: the Task Force on Climate Related Financial Disclosure’s 2019 Status Report shows a steady increase in the number of investors taking the physical risks of climate change into consideration in their decision making. Michael Bloomberg, a former mayor, investor, business owner and climate activist, as well as the co-lead of TCFD, points out that assessing climate risks means that “businesses are better informed about the risks they face, and investors are more capable of making sound decisions.”

In the fickle investment marketplace, accounting for and acting to avoid the worst of climate risk beyond physical assets to your strategies and operations is likely to bring competitive advantage. That would be an Amazonian move.

Image credit: Darin Kim/Flickr