The World Economic Forum (WEF) has listed the climate crisis, digital threats, and geopolitical turbulence as notable risks in its 2020 Global Risks Report, with the group’s president Borge Brende comparing inaction on the climate crisis to “moving around the deckchairs on the Titanic”.
The report details a number of global risks that could have the biggest impact on governments, the global financial system and citizens. It forecasts the year ahead to witness continued domestic and international divisions along with a global economic slowdown.
In a press release, the WEF said: “Economic and political polarisation will rise this year, as collaboration between world leaders, businesses and policy-makers is needed more than ever to stop severe threats to our climate, environment, public health and technology systems.”
Of the top ten risks in terms of likelihood, two out of ten relate specifically to cyberspace saying that “data fraud or theft” and “cyberattacks” will continue to challenge businesses. The report also explains that digital fragmentation poses a significant risk to financial growth as some populations are left behind.
The WEF report explains that, although 50% of world’s population is now considered to be online and roughly one million people are connected each day, “unequal access to the internet, the lack of global technology governance framework and cyber insecurity all pose significant risk.”
WEF lists cyberattacks and information infrastructure breakdown as two of the top ten risks in terms of the possible impact on the global market over the next decade. The report explains that “Geopolitical and geo-economic uncertainty – including the possibility of fragmented cyberspace – also threaten to prevent the full potential of next-generation technologies from being realised”.
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Since 2017 the WEF has considered data fraud and theft within the top five most likely risks. However, in this year’s report the top five most likely risks related directly to climate and environment for the first time, following a year of a increased publicity for climate issues.
In a stark warning on the risks associated with climate change, Brende told a press that “We have only a very small window and if we don’t use that window in the next 10 years we will be moving around the deckchairs on the Titanic”.
Emily Farnworth, WEF head of climate change, acknowledged the gravity of the crisis adding: “We know what the challenge is, we need to get on and address it.”
In the ten risks for the next decade by likelihood, the top five are extreme weather, climate action failure, natural disasters, biodiversity loss, and human-made environmental disasters. In terms of risks impact, climate action failure was ranked by the WEF as the number one risk, with biodiversity loss, extreme weather, natural disasters, and human-made environmental disasters again in the top ten.
The summary of the report reads: “Climate change is striking harder and more rapidly than many expected. The last five years are on track to be the warmest on record, natural disasters are becoming more intense and more frequent and last year witnessed unprecedented extreme weather throughout the world.
“Alarmingly global temperatures are on track to increase by at least 3°C towards the end of the century – twice what climate experts have warned is the limit to avoid the most severe economic, social and environmental consequences.”
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WEF described the climate threat as a “planetary emergency” that could cause loss of life and increase already tense geopolitical and social tensions.
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 a short-term benefit but for tackling our deep-rooted risks.”
Sounding the alarm
The WEF Global Risks Report sounds the alarm on five key issues all derived from the environment, which include:
“Extreme weather events with major damage to property, infrastructure and loss of human life; Failure of climate-change mitigation and adaptation by governments and businesses; Human-made environmental damage and disasters, including environmental crime, such as oil spills, and radioactive contamination; Major biodiversity loss and ecosystem collapse (terrestrial or marine) with irreversible consequences for the environment, resulting in severely depleted resources for humankind as well as industries; Major natural disasters such as earthquakes, tsunamis, volcanic eruptions, and geomagnetic storms.”
Speaking on the threat of climate-related risks, Marsh & McLennan Insights chairman John Drzik said: “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.
“High profile events, like recent wildfires in Australia and California, are adding pressure on companies to take action on climate risk at a time when they also face greater geopolitical and cyber risk challenges.”
A key aspect in the report is the damage done to biodiversity by human actions, which have lead to the extinction of innumerate plant and animal species. The WEF cites human actions as responsible for the loss of 83% of wild mammals and half of the earth’s fauna. Zurich Insurance Group Chief Risk Officer Peter Giger said that companies would need to adapt faster to avoid irreversible impacts on climate and biodiversity.
Giger said: “Biologically diverse ecosystems capture vast amounts of carbon and provide massive economic benefits that are estimated at $33 trillion per year – the equivalent to the GDP of the US and China combined. It’s critical that companies and policy-makers move faster to transition to a low carbon economy and more sustainable business models.
“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.”
Next week world leaders, including the US President Donald Trump, will meet in Davos for the World Economic Forum’s annual Switzerland meeting. According to the Managing Director of the WEF, Adrian Monck, this year’s event will be climate neutral with biofuel being offered to delegates who travel via plane to the event.
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