16/01/2019

World Economics Forum: World ‘Sleepwalking Into Catastrophe’ Over Climate Risk

AFR - James Fernyhough

Global business leaders have identified the potentially catastrophic effects of climate change as by far the greatest long-term risk facing the world, in a hard-hitting report released by the World Economics Forum ahead of its annual meeting in Davos next week.
The Global Risks Report, which represents the views of business, academia and government, warned that the world was "sleepwalking into catastrophe" in its failure to produce and implement adequate policies to address the problem.
Environmental concerns eclipsed shorter term risks such as trade wars, social instability and economic crises. But the report warned the current geopolitical instability and a retreat into nationalism would make it harder to address longer term environmental risks.
Climate change, which will likely cause more bushfires and extreme weather events, is increasingly considered the major long-term risk by business. Dean Sewell
"The world's ability to foster collective action in the face of urgent major crises has reached crisis levels, with worsening international relations hindering action across a growing array of serious challenges. Meanwhile, a darkening economic outlook, in part caused by geopolitical tensions, looks set to further reduce the potential for international co-operation in 2019," the WEF warned.
"Of all risks, it is in relation to the environment that the world is most clearly sleepwalking into catastrophe."
Source: Executive Opinion Survey 2017, World Economic Forum
The 108-page report, the 14th annual report of its kind, was produced in partnership with two global insurance giants: brokerage Marsh & McLennan Companies, and insurer Zurich. The universities of Oxford, Pennsylvania and Singapore were also involved.
About 1000 global experts and decision-makers in big business, government, and academia were surveyed for the report about the areas they considered the major risks. Businesspeople made up the biggest single group of respondents.
The prominence of climate-change risk represents a surge in concern in the business community over an issue that 10 years ago did not even make the top five issues.
In this year's report, three of the top five risks – by both likelihood and impact – were environmental. Other major risks, such as water crises and forced migration, although not classed as environmental risks, were directly related to climate change.
An armed member of the Swiss Police watch from the roof of the Hotel Davos in Davos, Switzerland, where the World Economic Forum will take place. Simon Dawson
'High stakes'
The report comes a week before the forum's high-profile annual conference in Davos, Switzerland, in which chief executives from 1000 of the biggest companies meet with world leaders to discuss the big political and economic issues. The report will form the basis of discussions.
WEF president Børge Brende said the report highlighted the need for "new ways of doing globalisation".
"Renewing and improving the architecture of our national and international political and economic systems is this generation's defining task. It will be a monumental undertaking, but an indispensable one. The Global Risks Report demonstrates how high the stakes are – my hope is that this year's report will also help to build momentum behind the need to act."
Prime Minister Scott Morrison claims Australia will meet its Paris emissions targets 'in a carter', but official government figures suggest this is not true. MICHAEL FRANCHI
Sean Walker, chief underwriting officer for general insurance at Zurich Australia, said it was no surprise environmental risks dominated the report "in a year that's been characterised by bushfires, heatwaves and flooding".
"Australian businesses should be building climate-change resilience and adaptation strategies into their broader business plans. These plans need to be real and tangible, not treated as some 'horizon three' or 'black swan' conceptual event but as something to be addressed as part of a new operating environment," he said.
"This week, heat records have been broken in Western Australia, NSW and South Australia, and if these conditions persist there will undoubtedly be an impact on business."
Insurers have been at the vanguard of business efforts to tackle climate change because they will be among the first businesses to feel the financial effects of extreme weather events and rising sea levels.
The report comes less than a month after official figures showed the Morrison government was set to miss its 2030 carbon emissions reduction targets by a huge margin, contradicting its claim it will meet the Paris Agreement targets "in a canter".

The risks
Respondents rated "extreme weather events" and "failure of climate change mitigation and adaptation" as by far the two most serious risks in terms of likelihood and impact.
Water crises, biodiversity loss, ecosystem collapse, and natural disasters were also high on the list.
Source: Global Risks Perception Survey 2017-2018, World Economic Forum
The risk of cyber attacks was the only issue unrelated to climate change to score above average in both impact and likelihood categories.
The survey showed "weapons of mass destruction" was considered the risk that would have the single biggest impact, but least likely to eventuate.
Failure of national governance and profound social instability were considered far lower long-term risks than environmental catastrophe, scoring an average rating on likelihood, and below average on impact.
Terrorist attacks, unemployment, state collapse and energy price were all considered below-average risks on both likelihood and impact scales.
Asset bubbles in major economies and data fraud or theft were considered above average in likelihood but below average in impact.
Breakdown of critical information infrastructure and outbreak of infectious disease were considered high impact but below average in likelihood.
While environmental risks dominated the long-term outlook, the very short term – over the next year – was dominated by concerns relating to geopolitical tensions over trade, as well cyber security.

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