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How can we tackle the effects of air pollution on human health?

ESG/SRI, Responsible Investing

BNP Paribas Asset Management

The quality of the air we breathe can have a significant impact on our health. Alex Bernhardt explores the climate change-driven causes of air pollution and how to tackle the problem.

Climate change impacts human health in a number of ways. Rising average temperatures mean a higher risk of heatwaves – at the time of writing, the US Pacific Northwest is experiencing ‘life-threatening’ temperatures. Indeed, the Lancet has described climate change as ‘the biggest global health threat of the 21st century.’

Alongside the risk of extreme temperatures, there is another factor closely interlinked with the changing climate that can affect human health: air pollution.

Air pollution is tied to the causes of climate change as burning fossil fuels in power stations and vehicles creates local air pollutants such as NOx and particulate matter, alongside greenhouse gases. Recent research has found that fine particulate matter (PM2.5) from fossil fuel combustion resulted in one million deaths worldwide in 2017 – with coal power accounting for half of these fatalities.


What’s more, air pollution has an unequal impact. The average level of air pollution in cities worldwide is four times higher than the World Health Organization’s maximum recommended levels, but the worst-affected cities are all in Pakistan, India, Bangladesh and China – i.e. developing markets.

According to the WHO, air pollution inequality is increasing. This is also true in developed nations, for example, in the US, where lower-income communities are typically more affected by polluted air from roads, fossil fuel plants and industry.

But air quality isn’t just compromised by the causes of climate change;  air pollution is also linked to the effects of climate change as we see from the increase in wildfires in many parts of the world.


Wildfire smoke comprises 80% PM2.5 and, based on hospital admission data from Southern California, it has been found to be worse for human respiratory and immune systems than other air pollution sources.

Across the globe, wildfires are becoming more extreme and widespread. This is the case in the western US, which has seen an eight-fold increase in the number of severe forest fires between 1985 and 2017.

Exhibit 1: The August 2020 ‘River Fire’ of Salinas, Monterey County, fills the sky with smoke and flames. 

Source: Shutterstock

While factors such as forest management practices can influence the frequency and severity of fires, around 55% of the increase in fire fuel aridity in the western US since 1979 has been tied to climate change, with an estimated doubling of forest area burned between 1984 and 2015 than would have otherwise been the case without climate change (see Exhibit 1).

As a certain amount of further climate change is already ‘locked in’ due to a lag in the temperature response between current emissions and the time it will take for society to decarbonise, these trends are set to continue.


Healthcare is one obvious example. The WHO estimates around seven million deaths per year are related to air pollution, with wildfires increasing hospital admissions of high-risk individuals in fire seasons. At peak fire-related PM2.5 conditions, the odds of an individual seeking emergency care increases by around 50%, according to the Michigan Tech Research Institute. Evidence is also increasingly tying air quality to other health issues such as Parkinson’s disease, Alzheimer’s, miscarriage, brain cancer and depression in later life.

Insurers in wildfire-prone areas should prepare for more health (and property) claims in the summer months. In California, a projected intense fire season this year alongside the state ending the moratorium on insurers cancelling homeowners’ policies could result in millions of people losing their home coverage in November. This could then impact banks’ ability to provide mortgages for such properties.

Forestry and agricultural crops will clearly be impacted by fire and/or smoke, as has been the case with wine production in the Napa Valley, and changes in fire activity globally will have an impact on biodiversity. There can be a lingering effect on supply chains and workers as labour participation and productivity – particularly in outdoor jobs – is affected.

Fossil fuel power generators and internal combustion engine vehicle manufacturers are also under increased pressure to decarbonise and clean up the local impacts of their operations and products.


Mitigating climate change on a global level is clearly a priority, with decarbonisation improving air quality as well as reducing the risk of future wildfire-related events.

Alongside this, since even a 2 degrees warmer world will have significantly different weather patterns, more local measures need to be undertaken to improve resilience. Some forest management practices – including the use of prescribed burning and manual forest thinning – have been shown to reduce the risk of wildfires, although many of these tactics have historically been hindered by public budgetary and regulatory constraints.

Tackling the wildfire issue can also be achieved through public-private investment in programmes supporting biodiversity and natural capital. This has been the proposed approach for the Paradise nature-based fire resilience project in California, which aims to create a green natural buffer around the town of Paradise after the devastating 2018 Camp Fire.


Financing adaptations such as this can be difficult due to the challenges of monetising related investments. Community risk protection mechanisms, for example, typically do not produce associated revenue streams, their risk reduction benefits notwithstanding.

Green bonds, while growing in popularity, have not yet been tapped as a major source for resilience financing – as of the start of this year only around 900 green bonds have had a resilience or climate adaptation component. That is a fraction of the overall cumulative USD 1 trillion plus in green bonds issued since 2007.

More exploration of green bonds as a means of financing adaptation is needed alongside innovative financing mechanisms such as environmental impact bonds, catastrophe bonds and resilience bonds.


Additionally, supporting the electrification of vehicle fleets worldwide should have a significant impact. Research indicates replacing 25% of all internal combustion engine cars on US roads with electric vehicles would save USD 17 billion a year through avoided air pollution and climate change damage. Decarbonising energy grids would result in further and greater health benefits.

Engagement with corporations and public officials on these issues is important as air pollution that is driven by both the causes and effects of climate change is a public health and an equity emergency, not just a climate emergency.

Focusing on financial innovation and public-private collaboration can allow investors, alongside others, to help tackle this critical issue that sits at the interface of planetary and human health.


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