The latest report reveals the increasing threat climate change directly poses to our economic security.
The risks from impacts such as more frequent and extreme storms, floods and droughts are set to increase 50% over the next 12 years. 67 vulnerable countries – who contribute up to a third of global GDP – are becoming increasingly exposed, vulnerable and unable to adapt, placing the entire global economic system in jeopardy.
Analysts warn that cyclone Phailin, which struck India at the beginning of October, is a case in point.
It caused an estimated $4.2 billion worth of damage to the agricultural and power sectors in the state of Odisha alone, and left roads, ports, railways and telecommunications networks damaged.
They also warn that businesses expanding into seemingly lucrative emerging markets – including India, Pakistan, Vietnam as well as Bangladesh and China – are highly vulnerable to climate impacts and should factor in the potential climate risks to their regional investments.
James Allen, Head of Environment at Maplecroft said:
With global brands investing heavily in vulnerable growth markets to take advantage of the spending power of rising middle class populations, we are seeing increasing business exposure to extreme climate-related events on multiple levels, including their operations, supply chains and consumer base. Cyclone Phailin demonstrates the critical need for business to monitor the changing frequency and intensity of climate-related events, especially where infrastructure and logistics are weak.
Al Gore and Bill McKibben today reminded the public that it is not just only climate impacts that threaten economic security, but the projected loss in value of high-carbon assets like fossil fuel holdings that could hit the global economy hard.
Gore warned that companies and investors risk huge market losses, as climate action, social pressure and the rise of renewables devalue fossil fuel assets. He also warned that “delaying climate action… will not delay climate change itself” and investors will face even worse economic impacts in the future from climate inaction.
Investors can strand fossil-fuel energy assets today, or absorb the cost of inaction by causing a much larger stranding across industries and asset classes in the future. The case to incorporate carbon risk into both equity and debt valuations now is one of short- and long-term prudent risk management.
McKibben joined Gore in highlighting the growing momentum behind the divestment movement, which he insists is because the day to day reality of climate change means more and more cities and institutions realise that they can no longer “simultaneously decry the wreckage of the climate and try to profit from it for a few more years”.
The mayor of Seattle explained that his city was already spending millions building seawalls – what sense did it make to invest in the companies making that work necessary? The trustees of San Francisco State University recognised that it made no sense to have, on the one hand, a physics department understanding climate change and on the other hand, an endowment full of oil and gas stocks.
Confronted with both environmental and economic risks of climate change institutions around the world– from religious groups, state and cities councils, universities and financial institutions including the World Bank and the European Investment Bank – are increasingly moving away from fossil fuels, with new research suggesting the fossil fuel divestment movement is growing faster than any previous divestment campaign.