Climate Change, the #1 threat to the Global Economy

Summary

Published on January 14, the Global Risks Report 2016 identifies the failure of climate change mitigation and adaptation as the top risk to the global economy for the decade to come. Presented here is a quick overview of the report.

28Jan.
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Each year for the past 11 years, in preparation for Davos, the World Economic Forum (WEF) releases a report on the main risks looming over the global economy. For 2016, 750 experts and decision-makers from all over the world were asked to examine 29 global risks divided into broad categories (societal, technological, economic, environmental and geopolitical) and to rank them by degree of likelihood and level of impact over the next 10 years.

The result was unequivocal: the inability to mitigate and adapt to climate change came in at the top of the list of risks with the greatest impact on the global economy, ahead of weapons of mass destruction, water crises, large-scale involuntary migrations and severe energy price shock (upward or downward).

Conversely, in terms of probability, this climate risk came in third, after involuntary migrations and extreme weather events. This finding is relatively unsurprising, given the fact that the number of refugees and displaced persons around the world stood at 59.5 million in 2014, “almost 50% more than in 1940, when World War II was in full swing, » reports the WEF.

A riskier world

“For the first time, four out of five categories – environmental, geopolitical, societal and economic – feature among the top five most impactful risks,” notes the World Economic Forum. « Evidence is mounting that interconnections between risks are becoming stronger, for example between climate change and involuntary migrations or international security, often with major and unpredictable impacts. »

In a world increasingly exposed to risk, climate change is becoming a dangerous catalyst: one that the WEF feels should incite companies to prepare more effectively for its repercussions.

Companies have a role to play

This pressure is “widening the backdrop of uncertainty against which international firms will increasingly be forced to make their strategic decisions. The need for business leaders to consider the implications of these risks on their firm’s footprint, reputation, and supply chain has never been more pressing,” says John Drzik, President of Marsh Global Risk and Specialties, one of the report’s partners.

Within this context, the authors of the Global Risks Report 2016 have come out in favor of implementing forceful actions aimed at building a resilient economy: what they call the “resilience imperative.” Reiterating their belief that “the resilience of any individual business depends heavily on the resilience of its suppliers and purchasers, whose supply chains can span many countries,” they exhort the private sector and States alike to give greater consideration to those interdependencies.

Photo © : World Economic Forum