Assessing the Long-Term Economic Ramifications of Hurricane Helene: Insights from Hurricane Harvey

As we begin to navigate the aftermath of Hurricane Helene’s severe impact across Florida, Georgia, and North Carolina in September, it remains challenging to predict its long-term economic consequences. However, we can draw some concerning parallels from the catastrophic effects of Hurricane Harvey. In 2017, Harvey resulted in unprecedented flooding that devastated Houston, Texas, leading to the destruction or compromise of more than 200,000 homes and businesses. A subsequent survey of businesses along the Texas Gulf Coast revealed that a staggering 90% were still experiencing revenue losses a full year after the disaster, primarily due to ongoing employee disruptions, reduced consumer demand, power outages, and logistical bottlenecks in their supply chains. In fact, businesses in the hardest-hit areas saw an alarming 86% increase in overdue credit balances as compared to pre-Harvey conditions.

Small businesses, representing approximately 90% of all enterprises, hold a crucial position in both local and global economic output. They contribute to over half of the global gross domestic product (GDP) and employ up to 70% of the global workforce. Unfortunately, due to their inherently smaller profit margins and limited resources relative to larger corporations, small businesses find themselves in a precarious position when faced with climate-related shocks. It’s incumbent upon us to not only mitigate the risks these enterprises face but to also boost their capacity to provide solutions to climate-related challenges. Small businesses can become pivotal in steering the shift towards a low-carbon, regenerative economy.

The potential for small businesses to affect the climate transition is significant. As integral components of the supply chains of large corporations, they are uniquely positioned to tackle pressing sustainability and social issues while also scaling effective solutions. By adopting practices such as greenhouse gas reporting and climate mitigation strategies, small businesses can enhance their appeal to corporate clients eager to reduce their supply chain emissions, thereby fostering opportunities for growth and collaboration.

Yet, the reality is that small businesses cannot navigate this landscape alone. According to a 2023 survey conducted by the SME Climate Hub, which concentrates on businesses with fewer than 500 employees, 41% of small and medium-sized enterprises indicate they are making strides toward climate action, yet they face significant obstacles. A lack of financial resources and inadequate knowledge impedes their ability to effectively cut emissions at the pace they desire.

A recent report by Christensen Global, supported by the Mastercard Center for Inclusive Growth, highlights three essential elements that small businesses require to harness their potential for driving climate-smart and inclusive growth: access to quality data, capital, and wrap-around support.

01
The Importance of Data

Data serves a fundamental role in enabling small businesses to adapt to the challenges posed by climate change while simultaneously helping to reduce emissions that exacerbate the crisis. Enhanced data collection and insightful analytics can significantly boost their operational capabilities in the face of climate-related disruptions across various markets. Tools that facilitate tracking and reporting of greenhouse gas emissions are increasingly becoming standard expectations from corporate buyers and regulatory bodies. However, to successfully access this data, small businesses need better collaboration with intermediaries that typically gather and manage such information. It is crucial to ensure that small enterprises are equipped to engage in the data exchange processes involving NGOs, government agencies, and corporations interested in collaborating with them. Furthermore, when data is collected from small businesses, especially those whose proprietors may not be well-versed in climate jargon, it’s vital to pose straightforward questions. For instance, figuring out whether specific interventions have improved their financial savings, enhanced access to insurance, or increased their resilience to natural disasters is critical. The social impact measurement firm 60 Decibels employs brief, standardized phone surveys to capture relevant data from customers and suppliers, ensuring comparability and consistency across the board. They have successfully surveyed farmers regarding their engagement with resilient agricultural practices and the impacts of such practices on their resilience.

02
The Need for Accessible Capital

Access to capital and risk management tools is essential for the survival and growth of all businesses. Emerging economies alone require nearly $3 trillion annually by the year 2030 to effectively adapt to the ongoing changes in climate, according to the International Finance Corporation (IFC). Yet, many small businesses find themselves unable to afford the costs associated with insurance premiums or may not even qualify for insurance due to their varying levels of vulnerability. The insurance industry has an opportunity to broaden its offerings by creating more inclusive and accessible plans focused on both preemptive measures against disasters and recovery afterward. An exemplary initiative is the Women’s Climate Shock Insurance and Livelihood Initiative, which combines personalized parametric insurance products with cash assistance, automatically providing payouts when temperature thresholds are breached. This initiative aims to help women—who are disproportionately impacted by extreme heat—recover from losses, ensure family safety, and maintain their health. Furthermore, transition capital, characterized by patient, risk-tolerant financial support from donors, impact investors, and corporations, can empower small businesses to implement mitigation techniques and pursue novel business ventures.

03
Comprehensive Wrap-Around Support

It is critical for small businesses to have access to reliable institutions, such as community development finance institutions (CDFIs), chambers of commerce, and various business services organizations. These entities can leverage their established reputations and connections to provide essential technical assistance, facilitate market access, and deliver comprehensive training programs. Such initiatives uplift small businesses, positioning them as crucial contributors to both climate adaptation and mitigation efforts. The SME Climate Hub, for instance, is actively delivering climate education aimed at helping small businesses accurately measure and communicate their greenhouse gas emissions. Additionally, Inclusiv, a network of CDFIs, trains lenders specifically in solar loan origination and design. It’s vital that small businesses are prioritized in the design of supportive solutions—these efforts must be tailored to align with the limited resources and capabilities that these enterprises possess to avoid imposing undue burdens.

The inclusion of small businesses in climate action strategies can yield even greater results. By prioritizing these enterprises within climate initiatives and integrating an environmental perspective into economic development programming, we can build a more resilient future. Collaboration among the private sector, philanthropic organizations, investors, service providers, NGOs, and government bodies is essential for creating, scaling, and replicating effective solutions that not only prepare small businesses for climate impacts but promote a sustainable, climate-smart growth trajectory.

AI legalese decoder can play a crucial role in assisting small businesses in navigating this challenging environment. By breaking down complex legal language into clear, understandable terms, this AI tool enables business owners to comprehend agreements related to climate initiatives, insurance policies, and contractual obligations. This simplifies the process of complying with regulations, securing funding, and developing partnerships that are vital for climate adaptation and resilience efforts. Furthermore, AI legalese decoder can aid businesses in drafting their own documents, ensuring they incorporate best practices for sustainability while effectively protecting their rights and interests.