Climate change will touch every economy and every person on the planet. That said, some will feel the impact before others.
The world’s largest insurance companies are already taking into account the effects of climate change-related extreme weather and are vocal about the price tag. According to Swiss Re, the second-largest reinsurance company in the world, natural disasters linked to climate change triggered economic losses of $155 billion in 2018 and contributed to the fourth-highest insurance payout ever: $76 billion. They are also quick to point out that these figures represent the cost of climate change in its relative nascency – it’s only the beginning.
A United Nations Development Programme report suggests that hotter temperatures, higher seas and atmospheric disruption could diminish the global GDP by as much as US$33 trillion in 2050.
When it comes to climate change, emerging economies are the most at risk, but even the world’s wealthiest countries could see a reversal of their GDP growth. The potential reduction in macroeconomic output from Japan, Germany and the USA will trickle down globally, hastening economic contraction and reducing global spending on infrastructure, food production and energy. According to the Intergovernmental Panel on Climate Change, even if the efforts of the Paris Agreement (which seeks to limit global warming to 1.5°C above preindustrial levels) are successful, some industries will remain more vulnerable to the repercussions of climate change than others.
However, climate change outcomes are not categorically adverse in individual cases – even if they are predominantly so, broadly speaking. Innovation in response to or in mitigation of climate change might be both constructive and lucrative.
Here are five industries that are already feeling the effects of climate change.
The enormous payouts becoming commonplace for insurance companies are not just putting a strain on the industry – they are completely reshaping the business. Many companies have withdrawn from offering certain types of coverage altogether. A report from the non-profit, sustainability advocacy organisation Ceres highlights that even though annual losses from natural catastrophes have continued to increase, the portion that is actually insured has declined.
Not only does the insurance industry’s partial retreat leave consumers stranded in the face of climate change-related disasters, but it also presents a challenge for those companies that remain. Determining premiums that are already escalating to mitigate potential losses will become increasingly difficult. Some firms, like Lloyd’s of London, are investing resources and money in proactive, educational approaches as part of a creative prevention strategy the industry is embracing. A new focus on risk management is perhaps the first of many ways the insurance industry will have to change in order to keep up with climate change.
Not only does the insurance industry’s partial retreat leave consumers stranded in the face of climate change-related disasters, but it also presents a challenge for those companies that remain.
Over 28 per cent of the world’s population depends on agriculture for their income. As the temperature increases and water becomes more scarce, those that rely on the land for their livelihoods will feel the pressure. Although warmer average temperatures can catalyse crop growth, they can also shorten seed maturity time, reducing overall yields. In growing areas more susceptible to the impact of climate change, the results might be even more dramatic. In China, wheat yields are projected to drop by 9.4 per cent by 2050 under aggressive climate change scenarios.
The implications of a relative decrease in food production will be far-reaching and particularly difficult for agriculturalists in regions already facing water shortages. Asia – which has 60 per cent of the world’s population but only 36 per cent of its obtainable water – and North Africa and the Middle East – which have less than 2 per cent of the planet’s available water but 6 per cent of world’s population – are more vulnerable because of this imbalance.
Like other industries, agriculture is responding with technologies such as smart irrigation systems, water recycling and even drones to identify needs more effectively. Whether or not the majority of the world’s farmers will ever have access to this technology remains to be seen.
Regardless, some farmers are innovating their own solutions to help stave off global warming. The Sousek family farm in the UK operates wholly without the use of fossil fuels. Instead, they rely on a combination of solar panels, wind turbines and a biogas digester for their needs. Not only have they reduced their carbon footprint by 119 per cent, but their organic farm also puts 150 tonnes of carbon dioxide back into the ground annually.