- Expected global GDP impact by 2050 under different scenarios compared to a world without climate change:
-18% if no mitigating actions are taken (3.2 degrees C increase);
-14% if some mitigating actions are taken (2.6 degrees C increase);
-11% if further mitigating actions are taken (2 degrees C increase);
-4% if Paris Agreement targets are met (below 2 degrees C increase)
- Economies in Asia would be hardest hit, with China at risk of losing nearly 24% of its GDP in a severe scenario, while the world's biggest economy, the US, stands to lose close to 10%, and Europe almost 11%
Swiss Re Institute has conducted a stress test to examine how 48 economies would be impacted by the ongoing effects of climate change under four different temperature increase scenarios. As global warming makes the impact of weather-related natural disasters more severe, it can lead to substantial income and productivity losses over time. For example, rising sea levels result in loss of land that could have otherwise been used productively and heat stress can lead to crop failures. Emerging economies in equatorial regions would be most affected by rising temperatures.
Major economies could lose roughly 10% of GDP in 30 years
In a severe scenario of a 3.2 degrees C temperature increase, China stands to lose almost one quarter of its GDP (24%) by mid-century. The US, Canada and the UK would all see around a 10% loss. Europe would suffer slightly more (11%), while economies such as Finland or Switzerland are less exposed (6%) than, for example, France or Greece (13%).
Thierry Leger, Group Chief Underwriting Officer and Chairman of Swiss Re Institute, said: "Climate risk affects every society, every company and every individual. By 2050, the world population will grow to almost 10 billion people, especially in regions most impacted by climate change. So, we must act now to mitigate the risks and to reach net-zero targets. Equally, as our recent biodiversity index shows, nature and ecosystem services provide huge economic benefits but are under intense threat. That's why climate change and biodiversity loss are twin challenges that we need to tackle as a global community to maintain a healthy economy and a sustainable future."
Climate Economics Index ranks countries' resilience to climate change
Along with evaluating each country's expected economic impact from climate risks, Swiss Re Institute also ranked each country on its vulnerability to extreme dry and wet weather conditions. In addition, it looked at the country's capacity to cope with the effects of climate change. Put together, these findings generate a ranking of countries' resilience to the impacts of climate change.
The ranking displays a similar view to the GDP impact analysis: Countries most negatively impacted are often the ones with fewest resources to adapt to and mitigate the effects of rising global temperatures. The most vulnerable countries in this context are Malaysia, Thailand, India, the Philippines and Indonesia. Advanced economies in the northern hemisphere are the least vulnerable, including the US, Canada, Switzerland and Germany.
Public and private sectors play a crucial role in accelerating climate action
Given the consequences highlighted in Swiss Re Institute's analysis, the need for action is indisputable. Coordinated measures by the world's largest carbon emitters are crucial to meet climate targets. The public and private sectors can facilitate and accelerate the transition, particularly regarding sustainable infrastructure investments that are vital to remain below a 2 degrees C temperature increase. Given the long-term horizon of their liabilities and long-term capital to commit, institutional investors such as pension funds or insurance companies are also ideally positioned to play a strong role.