The global economy is facing a dire warning from risk management experts at the Institute and Faculty of Actuaries (IFoA). According to a new report published in collaboration with scientists at the University of Exeter, the global economy could suffer a 50 percent loss in gross domestic product between the years 2070 and 2090 due to the catastrophic shocks of climate change. This warning underscores the urgent need for political leaders to take immediate action to decarbonize and restore nature.
The report, originally published by The Guardian and part of the Climate Desk collaboration, highlights the increased risk to global economic well-being from climate change impacts such as fires, flooding, droughts, temperature rises, and nature breakdown. The IFoA, known for using math and statistics to analyze financial risk for businesses and governments, emphasized the need for accelerated action to tackle the climate crisis.
Recent data from the European Union’s Copernicus Climate Change Service revealed that climate breakdown has driven the annual global temperature above the internationally agreed 1.5 Celsius target for the first time in 2024, resulting in supercharged extreme weather events. Without urgent action to decarbonize, remove carbon from the atmosphere, and repair nature, the report predicts a plausible worst-case scenario of a 50 percent loss in global economies by 2090.
The lead author of the report, Sandy Trust, expressed concern over the lack of a realistic plan to avoid this scenario. Economic predictions that estimate damages from global heating could be as low as 2 percent of global economic production for a 3-degree Celsius rise in global average surface temperature were deemed inaccurate. Trust emphasized that these predictions are blinding political leaders to the true risks of their policies.
The report also criticized the climate risk assessments used by financial institutions, politicians, and civil servants, stating that they ignore expected severe effects of climate change, such as tipping points, sea temperature rises, migration, and conflict. The concept of “planetary insolvency” was introduced, highlighting the increasing risk of Earth’s systems being so degraded that humans could no longer receive critical services to support societies and economies.
Nature is the foundation of human prosperity, providing essential resources such as food, water, and air, as well as raw materials and energy for the economy. Threats to this foundation pose risks to future human prosperity, necessitating immediate action to avoid planetary insolvency. The report, titled “Planetary Solvency – Finding Our Balance with Nature,” urges a shift away from dominant economic theories that fail to account for the true risks of climate change.
In conclusion, the report serves as a stark reminder of the urgent need for political leaders to address the climate crisis and take decisive action to decarbonize, restore nature, and protect the global economy from the catastrophic impacts of climate change. Failure to do so could result in irreversible damage to our planet and future generations. A recent report has called for a shift in perspective among political leaders and governments across the developed world to address the issue of global heating. The report emphasizes the need for a better understanding of the changes required to combat climate change and protect the planet for future generations.
The report highlights the urgent need for policymakers to recognize the risks associated with ongoing human activities that are degrading the Earth’s natural resources. It suggests the implementation of a planetary solvency risk dashboard to provide policymakers with the information needed to make informed decisions that prioritize the protection of the environment.
Tim Lenton, a renowned expert in climate change and Earth systems science, stresses the importance of reevaluating current approaches to assessing and controlling planetary risks. He believes that the concept of planetary solvency offers a practical way to identify global risks and take action to mitigate them before it’s too late.
The report warns that failure to address escalating planetary risks could have dire consequences for societies and economies around the world. It urges leaders to prioritize environmental sustainability and take urgent action to limit the impact of human activities on the planet.
It is clear that a paradigm shift is needed to ensure the long-term survival of our planet and the well-being of future generations. By prioritizing environmental protection and sustainability, policymakers can create a path towards a more resilient and prosperous future for all.
