Economic sector
The economic sector is affected by climate change mostly through changes in state regulations and taxation systems. As the climate changes take place slowly over time, companies are able to react to it and adjust therefore relatively well, even if the adjustment means stopping their activities in areas which are vastly affected by climate changes. However, the most important factor concerning the economy as a whole is the ability to seize new opportunities arising from climate changes in the future.

Economic sector in the context of climate change adaptation is divided into the following systemic areas:

Insurance sector
Global warming has increased the likelihood of occurrence and extent of extreme weather conditions and thus led to the appearance of several new risks. Therefore, the insurance sector has become one of the key sectors in the area of adaption to climate change. Despite the fact that the insurance sector does not lead to adaption per se, it does help to diminish the potential losses of other sectors and leads the way in risk management area. This means that although the insurance sector itself does not help to avoid human or physical losses caused by extreme weather conditions, it does help to decrease the economic loss from these occurrences and facilitates post-catastrophic recovery.

Regarding the Estonian insurance sector it is important to note that the insurance market is small and relatively poor, therefore compulsory and semi-compulsory insurance types dominate the market (car insurance, home insurance). High-risk products, including products concerning extreme weather conditions, are mediated to larger international insurers.

Banking and finance sector
The impact of climate change on financial sector can be explained by three types of impact mechanisms on companies: the legislative and physical risks influence all companies operating in the same sector and area, while the business risk can be derived from the business-level decisions. Markets and financial systems provide a way to avoid these risks. During the past years, the financial sector is gaining a leading role in fighting the climate changes due to its ability to influence various stakeholders through financing conditions and other activities. Examples of these impact mechanisms include:
– investments in low-carbon solutions
– financing emission reduction technologies
– financing activities of adjusting to climate changes
– measurement and transparency;
– involvement of companies and policymakers
In the case of Estonia it should be taken into account that the banking sector is dominated by the subsidiaries of foreign banks, Estonia does not have a secondary market for bonds and derivatives or government-issued bonds and the number of companies listed on the stock exchange is small. Thus the connection between adjustment to climate change and Estonian banking and finance sector is relatively small.

The impact mechanisms of climate change on employment are twofold – on the one side the climate changes influence employment directly via changes in specific sectors, on the other hand, the indirect changes are caused by structural adjustment activities to climate changes which create the need for new and different types of jobs. The main sectors through which the employment is influenced are: agriculture, fishing sector, forestry, building sector, energy sector, tourism, health care sector.

Considering climate change predictions, the influence of weather changes on employment will probably stay modest in Estonia, especially when compared to probable influence of political and demographic changes in general. A positive impact from weather changes on employment is expected in the tourism sector, while some decline in the number of jobs might be visible in the energy sector.

Business and entrepreneurship
For businesses, the biggest difficulty is related to coping with the uncertainty and risks that accompany climate change. The biggest threats of climate change for entrepreneurs are the results of extreme and unexpected weather conditions, the companies tend to adjust to continuous changes on the run. More sensitive business sector where the outcome is weather-dependent are: agriculture, fishing, forestry, tourism, building sector and energy sector.

In general, it could be said that companies are ready to react to external conditions faster than the climate changes. It is more important for companies to use new business opportunities arising from climate change.

The impact of climate changes on industry appear mostly through adjustment measures: the adaption of buildings to new weather conditions, availability and prices of raw material; changes in the supply chain and transportation. Most of the potential impacts are related to disturbances in the production process that require fast reaction and relatively high unexpected additional expenses to restart the production process. In Estonia, the stability of electric supply is one of the most important specific factors which, especially in the rural areas, is dependent on strong winds.