17th January 2020
The World Economic Forum published their annual Global Risks Report 2020 this January, supported by Marsh & McLennan Insights, and based on feedback from nearly 800 global experts and decision-makers. For the first time in its 15-year history, it concluded that environmental threats dominate the top five long term risks by likelihood, and hold three of the top five spots by impact.
The World Economic Forum president, Børge Brende, said: “The political landscape is polarised, sea levels are rising and climate fires are burning. This is the year when world leaders must work with all sectors of society to repair and reinvigorate our systems of cooperation, not just for short-term benefit but for tackling our deep-rooted risks.”
The top 5 environmental risks by likelihood were identified as extreme weather events, failure of effective climate change mitigation and adaptation, human-made environmental damage such as oil spills, major biodiversity collapse and ecosystem loss, and major natural disasters such as earthquakes.
For John Drzik, the chairman of Marsh & McLennan Insights, businesses will have to increasingly integrate climate risks into their plans. “There is mounting pressure on companies from investors, regulators, customers, and employees to demonstrate their resilience to rising climate volatility. Scientific advances mean that climate risks can now be modelled with greater accuracy and incorporated into risk management and business plans.”
Peter Giger, group chief risk officer of Zurich Insurance Group, concurred “We are already seeing companies destroyed by failing to align their strategies to shifts in policy and customer preferences. Transitionary risks are real, and everyone must play their part to mitigate them. It’s not just an economic imperative, it is simply the right thing to do."
The WEF Report was published in the same week that BlackRock CEO Larry Fink, warned that a bigger potential financial crisis than the Financial Crisis of 2018 could occur if investment firms don’t act to meet environmental challenges. BlackRock, with about $7 trillion under management, is the largest asset-management company in the world.
Overall it is clear that the direction of travel for policy makers, government, financial institutions, and the business community, towards low carbon economies, built upon sustainable business models, continues to gain traction. Increasingly climate change is being seen as a significant threat to business and finance, and a key component of coherent risk management systems.
The Scottish Forum on Natural Capital believes that viewing business decision-making processes through the lens of their impacts and dependencies on natural capital is a key approach by which business can gain new opportunities, mitigate risk, whilst also protecting and enhancing the natural world.
Read the report here: