Climate concerns top long-term WEF risks for first time

For the first time in the 15-year history of the World Economic Forum’s (WEF's) Global Risks Report, all of the top five long-term risks by likelihood relate to the environment. Amid a backdrop of escalation of weather events and Australian wildfires showing no signs of stopping, extreme weather was rated as the most likely risk in the next 10 years. 

To add fuel to the fire, the report cited the failure of climate change mitigation and adaptation as the second most likely risk. It questioned the world’s ability to work together to deal with common risks, forecasting rising domestic and international divisions and an economic slowdown in the year ahead.

In the annual Global Risk Perception Survey of more than 750 global experts and decision-makers, more than 78% of respondents expect economic confrontations and domestic political polarisation to rise in 2020. At a press conference on January 15 launching the report, various risks to businesses relating to climate change were cited, including unexpected regulatory change, rapid shifts in customer preference, reputational issues and potential litigation.

“The business community needs to focus more attention with more urgency on both the risk and opportunities stemming from climate change… We would strongly urge companies to be proactive in evaluating the risks and the financial impact of climate change on their businesses,” said John Drzik, president of global risk and digital at insurance brokerage and risk management firm Marsh.

On a positive note, actions to mitigate climate change are possible although “some sectors are a little bit more tricky to tackle than others such as cement, steel and chemicals,” said Emily Farnwoth, head of climate change initiatives from the WEF. 

Despite these challenging sectors, Mrs Farnworth was sanguine, stating that a report by the energy transitions commission demonstrated that it is theoretically possible for companies to reduce their emissions to net zero by 2050 at a cost of about 0.5% of global GDP.

Against the backdrop of geopolitical turbulence, especially with US-Iran conflicts escalating in the first few weeks of 2020, the WEF’s deputy head of the centre for geopolitical and regional affairs, Mirek Dusek, urged “dialogue”, and said he expected both policymakers and companies to take responsibilities to ease the risks in the long run. 

In terms of great powers’ responsibilities in the coming year, China, as a responsible player in multilateral agreements, plays a major role in manufacturing solar and wind, according to Borge Brende, president of the WEF. “World leaders must work with all sectors of society to repair and reinvigorate our systems of co-operation, not just for short-term benefit but for tackling our deep-rooted risks,” he said.