Our Wealth Faces A Greater Risk Due To The Changing Climate

global wealth risks 4 8global wealth risks 4 8

Do you want to know how much climate change could cost the global economy? UK-based researchers have come up with an answer, which they present with some surprising qualifications.

If global average surface temperature rises by 2.5°C over its pre-industrial level by 2100, they say, then an average of US$2.5 trillion, or 1.8%, of the world’s financial assets would be at risk from the impacts of climate change.

The researchers found that limiting warming to 2°C in 2100 would significantly reduce the “climate Value at Risk” (VaR), which measures the risk to investments, estimating how much they might lose given normal market conditions in a set time period.

The average value of global financial assets at risk would be $1.7 trillion, with a one per cent chance of $13.2 trillion being at risk, they add.

Inevitable uncertainties

At the UN climate conference in Paris last December, 195 countries agreed to work to keep global temperature rise this century well below 2°C, and to drive efforts to limit the increase even further, to only 1.5°C above pre-industrial levels. So this estimate sounds fairly reassuring.

But suppose the world overshoots the Paris target and ends up above 2°C by the end of the century? Estimating VaR is by no means an exact science, and the researchers found that the inevitable uncertainties in trying to establish it mean the average risk fails again to tell the whole story.

They say there is a one per cent chance that, in a world 2.5°C warmer, the total level of global financial assets at risk in 2100 could reach $24 trillion, or 16.9% of assets.

The authors point out that this total is almost five times greater than the estimates of $5 trillion for the total stock market capitalisation of fossil fuel companies today.

“Our results may surprise investors, but they will not surprise many economists working on climate change”

The researchers, from the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science and Vivid Economics, publish their findings in Nature Climate Change journal.

The lead author, Professor Simon Dietz, says: “Our results may surprise investors, but they will not surprise many economists working on climate change, because economic models have over the past few years been generating increasingly pessimistic estimates of the impacts of global warming on future economic growth.

Financial assets

“When we take into account the financial impacts of efforts to cut emissions, we still find the expected value of financial assets is higher in a world that limits warming to 2°C. This means risk-neutral investors would choose to cut emissions, and risk-averse investors would be even more keen to do so.

“Our research illustrates the risks of climate change to investment returns in the long run and shows why it should be an important issue for all long-term investors, such as pension funds, as well as financial regulators.”

Of the uncertainties in estimating the climate VaR, he says: “Although we are the first to produce a comprehensive estimate of the climate Value at Risk using an economic model, it is important to remember there are huge uncertainties and difficulties in performing economic modelling of climate change, so this should be seen as the first word on the topic, not the last.” – Climate News Network

About the Author

Alex Kirby is a British journalistAlex Kirby is a British journalist specializing in environmental issues. He worked in various capacities at the British Broadcasting Corporation (BBC) for nearly 20 years and left the BBC in 1998 to work as a freelance journalist. He also provides media skills training to companies, universities and NGOs. He is also currently the environmental correspondent for BBC News Online, and hosted BBC Radio 4's environment series, Costing the Earth. He also writes for The Guardian and Climate News Network. He also writes a regular column for BBC Wildlife magazine.

enafarzh-CNzh-TWdanltlfifrdeiwhihuiditjakomsnofaplptruesswsvthtrukurvi

follow InnerSelf on

facebook icontwitter iconyoutube iconinstagram iconpintrest iconrss icon

 Get The Latest By Email

Weekly Magazine Daily Inspiration

LATEST VIDEOS

can we cool the planet 7 22
Can We Cool The Planet?
by Robert Jennings, InnerSelf.com
Climate change has emerged as one of the most pressing challenges of our time. Over the past century, human activities…
i5w7rk3a
The Devastating Impact of 3C Global Warming
by Robert Jennings, InnerSelf.com
Global warming is a pressing issue that poses severe threats to our planet and all its inhabitants. In recent years,…
The Great Climate Migration Has Begun
The Great Climate Migration Has Begun
by Super User
The climate crisis is forcing thousands around the world to flee as their homes become increasingly uninhabitable.
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
by Alan N Williams, et al
The latest report from the Intergovernmental Panel on Climate Change (IPCC) states that without a substantial decrease…
The Caspian Sea Is Set To Fall By 9 Metres Or More This Century
The Caspian Sea Is Set To Fall By 9 Metres Or More This Century
by Frank Wesselingh and Matteo Lattuada
Imagine you are on the coast, looking out to sea. In front of you lies 100 metres of barren sand that looks like a…
Five Climate Disbeliefs: A Crash Course In Climate Misinformation
The Five Climate Disbeliefs: A Crash Course In Climate Misinformation
by John Cook
This video is a crash course in climate misinformation, summarizing the key arguments used to cast doubt on the reality…
The Arctic Hasn't Been This Warm For 3 Million Years and That Means Big Changes For The Planet
The Arctic Hasn't Been This Warm For 3 Million Years and That Means Big Changes For The Planet
by Julie Brigham-Grette and Steve Petsch
Every year, sea ice cover in the Arctic Ocean shrinks to a low point in mid-September. This year it measures just 1.44…
What Is A Hurricane Storm Surge and Why Is It So Dangerous?
What Is A Hurricane Storm Surge and Why Is It So Dangerous?
by Anthony C. Didlake Jr
As Hurricane Sally headed for the northern Gulf Coast on Tuesday, September 15, 2020, forecasters warned of a…

LATEST ARTICLES

global boiling is here 7 29
U.N. Warns: The Era of Global Boiling Has Arrived
by Robert Jennings, InnerSelf.com
The world faces an unprecedented climate crisis as temperatures soar and heat records are shattered across the globe.
amoc map 7 26
The Unseen Tipping Point: Understanding the Potential Impact of an AMOC Shutdown
by Robert Jennings, InnerSelf.com
The Unseen Tipping Point: Understanding the Potential Impact of an AMOC Shutdown Have you ever heard of the Atlantic…
can we cool the planet 7 22
Can We Cool The Planet?
by Robert Jennings, InnerSelf.com
Climate change has emerged as one of the most pressing challenges of our time. Over the past century, human activities…
global hungry 7 22
The Rising Tide of Global Hunger: Pandemic, Climate & Conflict Fuel Food Insecurity
by Robert Jennings, InnerSelf.com
In recent years, the world has witnessed a distressing surge in global hunger, painting a bleak picture of food…
keeping cool 7 20
Beat the Heat: Your Guide to Staying Safe in Extreme Temperatures
by Robert Jennings, InnerSelf.com
As the temperatures rise during the summer months, it's important to be aware of the risks associated with extreme heat.
i5w7rk3a
The Devastating Impact of 3C Global Warming
by Robert Jennings, InnerSelf.com
Global warming is a pressing issue that poses severe threats to our planet and all its inhabitants. In recent years,…
how hot is too hot 7 19
How Hot is Too Hot? The Risks of Extreme Heat on the Human Body
by W. Larry Kenney, Penn State et al
The answer goes beyond the temperature you see on the thermometer. It’s also about humidity. Our research is designed…
european heatwave 7 18
European Heatwave: What’s Causing It And Is Climate Change To Blame?
by Emma Hill and Ben Vivian, Coventry University
Europe is currently in the midst of a heatwave. Italy, in particular, is expected to face blistering heat, with…

The bleak history of whaling pushed many species to the brink of extinction, even in the remote waters of the north and south poles. Over 1.3 million whales were killed in just 70 years around...

From transport and housing to food production and fashion, our civilisation is driving climate and ecological breakdown.

Most of the big shippers’ fleets are less than 20 years old, but even the newer builds don’t necessarily have the most advanced technology.

As a tour guide on the Eastern Shore’s Harriet Tubman Byway, Alex Green has an up-close view of historic landmarks associated with the iconic abolitionist.

The UK’s new plan to control immigration has alarmed human rights groups. A Latin American example could offer hope instead.

The hurdle is no longer economic nor technical; our biggest challenges are political. A cleaner future is within reach.


 Get The Latest By Email

Weekly Magazine Daily Inspiration

New Attitudes - New Possibilities

InnerSelf.comClimateImpactNews.com | InnerPower.net
MightyNatural.com | WholisticPolitics.com | InnerSelf Market
Copyright ©1985 - 2021 InnerSelf Publications. All Rights Reserved.