UBS Warns Australian Middle Class Will Not Escape Unscathed From Climate Change

Fairfax - Anthony Macdonald

The UBS report found people who lived in cities most exposed to climate change risk already spent more of their household budget on housing compared to the national average in their countries. Irish Environment

Australians are facing depressed crop yields, mental health pressure and property damage from an increase in extreme weather brought about by climate change.
In considering climate change's impact on the world's middle class – which includes about two-thirds of Australians – investment bank UBS has warned that Australia's urbanised society would not go unaffected.
The investment bank said increased incidence of drought and severe storms affected Australia's significant agricultural sector, which might be struggling to keep up with the acceleration of extreme weather.
It also said extreme weather could adversely affect nutrition and infectious diseases, while rising temperatures would be felt by ageing rural populations.
"Ageing populations are very vulnerable to rising temperatures," UBS' Zurich-based head of UBS and Society Caroline Anstey said.
"Once temperatures get above 30 [degrees], it starts to put real pressure on people, especially people who are older and sick."
The UBS report, which includes the study of middle-class populations in 215 cities and 15 countries, found people who lived in cities most exposed to climate change risk already spent more of their household budget on housing compared to the national average in their countries.
The bank termed it "more fear, less fun", with more money on upkeep and other housing-related costs at the expense of luxury goods and entertainment.
Dr Anstey said the world's middle class had the political power and means to get governments to do more about climate change – and businesses were also taking notice.
"My belief is there is an under-appreciation of the impact of climate change on segments beyond the poor. The middle class have tended to be ignored because there was a feeling they would just internalise the cost, pay it," she said.
"The middle class have political weight and mobilising power. And governments tend to listen when the middle class do not want to carry the costs themselves of climate change adaptation."
The report has particular significance for Australia, given the large middle class and urban populations. UBS said more than 75 per cent of Australians lived in urban settings, which was the highest percentage in the world, while two-thirds of Australia's population could be classified as middle class.
Dr Anstey expects emerging middle classes, particularly from south-east Asian countries, to lead the way in tackling climate change, given the under-development of insurance markets.
"Loss aversion is a very strong determinant of behaviour," she said.
"You have things to lose and the middle class does. The middle class will, we believe, begin to exert more political power."
The UBS report found that people in developed markets tended to be under-insured, ignoring risks until after a rare catastrophe occurs. The analysts found that people tended to underestimate a disaster's occurrence or impact or faced budgetary constraints around insurance.
The report comes as natural catastrophes caused 16,200 fatalities and $US32 billion of damage in the first six months of 2015, based on UBS numbers.