Consequences of a Changing Environment

10 GLOBAL THEMES

Theme 9: Consequences of a Changing Environment

Extreme weather events featured prominently in global headlines in 2021, amplified by the recent Intergovernmental Panel on Climate Change (IPCC) 2021 report which concluded that more ambitious and immediate action to curb emissions is needed. Even though the Covid-19 pandemic and subsequent lockdowns led to carbon emissions falling by 7% as international travel came to a temporary halt, emissions have once again rebounded as societies start to reopen.

With this in mind, the UN Climate Change Conference COP26 in November 2021 presented a crucial opportunity for countries to commit to more aggressive national targets, ensuring that environmental issues will continue to dominate policy discussions in 2022 and beyond. Key factors that will likely have an impact on corporations range from longer-term risks, such as an increased likelihood of inter-state conflict and population displacement, to more immediate concerns such as infrastructural damage and operational impacts due to the higher frequency and intensity of extreme weather events.

In general, the impacts of climate change are very likely to play out disproportionately across the world, exacerbated by pre-existing inequalities and socio-political fault lines. Issues such as inter-state tensions over access to resources are likely to become increasingly frequent in Central Asia in particular, amplified by frequent border demarcation disputes. Across much of Africa, competition over scarce resources is also likely to become an increasingly frequent driver of violent conflict and inter-communal tensions, which would exacerbate an already challenging security environment.

Additionally, climate-related migration and population displacement are likely to become more frequent occurrences, carrying indirect implications for patterns of civil unrest and ethnic tensions across parts of the Middle East and Mediterranean. Similarly, factors such as water scarcity, crop loss and rising sea levels will also drive forced migration in Latin America in the coming years. Furthermore, food security concerns have also been underlined across parts of the world in 2021. Higher-than-usual temperatures and droughts have contributed to mass livestock die offs and projections of at least a 10% decline in harvests in Central Asia. This has exacerbated already high inflation in the region, leading to various regional governments imposing temporary export bans and price caps on staple food items.

Water Stress

Furthermore, across Western Europe, various high-profile extreme weather events including unprecedented floods in Germany and Belgium, as well as fires across Greece, Italy and France, underline the enduring and growing risk that extreme weather poses to infrastructure and operations. Additionally, in Russia, estimates suggest that climate change could cost the Russian economy around USD 50 billion by 2050. With a significant part of the country's land located in the Arctic – which is warming much faster than the rest of the world – infrastructural damage will become a greater concern as permafrost melts. In Western Europe in particular, these trends will ensure that climate activism remains a key driver of unrest as public scrutiny of governments and sectors perceived to be insufficiently committed to combatting climate change continues to increase.

Green policy risk is also likely to grow throughout 2022, particularly across Europe as governments seek to increase regulation and phase out coal. However, this change is unlikely to be immediate. Globally, the viability of green policies and transition to clean energy will clash with the enduring impact of the pandemic on the global economy and rising energy prices, thus potentially delaying immediate policy risk to businesses as some governments consider a rapid green transition to be too costly. Nevertheless, the focus on climate change is only set to increase in the year ahead, with the impetus behind the environmentalist movement also set to intensify.

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