What does the risk landscape look like today?

What does the risk landscape look like today?

Quelle: Clyde & Co: Climate Change Report

The 2020s are a critical decade in the fight against climate change. Global average temperature will continue its upward trajectory until emissions finally reach net zero. At the same time, the journey to net zero has only just begun (emissions were still rising until the pandemic hit3), and there is still extensive scope to make changes that could contribute significantly to decarbonisation.

Climate change creates physical risks, in which changing weather patterns, more extreme events and rising sea levels (alone or in combination) cause damage to property and infrastructure, impacting asset values and insurance premiums and disrupting supply chains. And the shift to a low-carbon economy will strand assets and may undermine business or investment decisions; if the transition is disorderly it may give rise to “carbon shocks”. Both act as a potential catalyst for a third type of risk: litigation risk.

PHYSICAL RISK

The physical effects of climate change – and its human cost – are clearer than ever. The decade 2011–2020 was the hottest on record4, culminating in the worst wildfires in modern history which devastated large parts of the USWest Coast and Australia5. In fact, climate-related natural disasters spiked by 83% in the past 20 years compared to the previous two decades6.

COVID-19 and the resulting shutdowns and economic crisis sharply reduced consumption of fossil fuels around the world, particularly in the transport sector. Even so, the resulting drop in emissions was only 5.8% globally7. Though that was the largest percentage drop sinceWorldWar II, it still falls short of the 7.6% annual reduction required this decade in order to get on track towards the 1.5°C temperature goal of the Paris Agreement8. And the early signs are that emissions will rebound this year.

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