Space-time clustering of climate extremes amplify global climate impacts, leading to fat-tailed risk.

We present evidence that the global juxtaposition of major assets relevant to the economy with the space and time expression of extreme floods or droughts leads to a much higher aggregate risk than would be expected by chance. Using a century long, globally gridded time series that indexes net water availability, we compute local occurrences of an extreme dry or wet condition for a specified duration and return period, every year. A global exposure index is then derived for major mining commodities, by weighting extreme event occurrence by local production exposed. We note significant spatial and temporal clustering of exposure leading to the potential for fat tail risk associated with investment portfolios and supply chains. The traditional approach of climate risk analysis only considers local or point extreme value analysis and hence does not account for this spatially and temporally clustered exposure. Consequently, the global economic implications of the past or future financial and social exposure are understated in current climate risk analyses. [ABSTRACT FROM AUTHOR]