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Should Climate Change Risks be Taken Seriously?


Can you imagine what the reactions would be like if a very influential UK based firm made it abundantly clear and warned that Brexit would hasten the economy into cliff edge which would consequentially lead to a long term loss in GDP which may be up to fifty percent?
 
Likewise, what do you think people’s reaction would be, if one of the world’s most influential investment companies warns of an impending doom for the global economy as a result of climate change and how this could lead to a global GDP loss of up to 50% which only very few companies can handle?
 
You don’t even have to assume, the reaction has started. That warning came this year and was barely noticed.
 
Schroders, with its assets being managed worth around $520bn, published an article in July as well as launched a new Climate Change dashboard that ought to have been the major talking points of several major bulletins around the world. This article carefully addressed the issue of climate change and how it is no longer a thing of the future but of now. The article stated the trend of global warming witnessed over the last 3 decades and how the same trends will enable a warming of over 2C in this century. The article also warned that the challenges are becoming acute by the year.
 
The implication of this climate change on the economy is something Schroders paid attention to. With the current trajectory, there is a high possibility that the GDP in the long run will witness a 10% knock off if 4C warming is observed this century. Even worse is its projection that a 50% long term GDP loss could be observed if the warming rises to 6C, which is unlikely but very possible. It also stated that with the current trend, a possible 2% loss in GDP could still be observed if the best case scenario of a 2C pathway plays out.
 
Whatever the case, there will be serious consequences, irrespective of whether or not the trend continues or if an amazing turn of events is witnessed, where climate change is properly managed and the extremely dangerous effects are avoided, business and investors will be forced to adapt to the climate ravaged ecosystem or decarbonized economy. Either way, Schroders stated that the overall earnings for global firms would be affected by up to 4% to 20%. There is no upside.
 
As stated categorically in the introduction of the article, investors may not be able to avoid the impact the climate change on the economy because it is expected that whether the global economy is rebuilt and less carbon intensive companies take over; or the trend continues the way it is now, climate change will be a crucial factor in global economy, society, and financial markets in the coming years.
 
It is crucial that emphasis is put on the words written in this report and consider who authored it. A top assets manager, one of the most important in the world, managing a company that has interests in steadiness and long term returns and no environmental axe to grind. The report was published to enlighten the world on the worst case scenarios that could lead to a collapse in the world economy even in this generation; as well as the best case scenarios which will also have its impacts on the economy. It might be a lot more attractive than the worst case scenario, but would still require a lot of adjustment and fundamental reshaping by the key players.
 
The report also explained how the world has been heading towards the worst case scenario and how it has managed to get ourselves closer to that scenario than the best case scenario. It clearly examined the major policies, investments, and technology across twelve important themes and asserted that they are all acting in line with actions that will surely deliver a warming of more than 2C.
 
All optimism felt at the moment is a result of the rapid roll out of renewable, impressive political targets and a reduction in coal demand yet, these efforts as they currently are, can only lead us to a warming between 2.2C and 3.1C. However, a trajectory leading to between 5.3 and 7.8 is implied by the current oil and gas investment and production. With all these considered by Schroders, he asserted that it could be heading for a warming of 4.1C by the end of this century; just as it was projected in the Mad Max territory.
 
It won’t be wrong to say, despite its explosive conclusion, the report was generally dry; however, it is noteworthy to point out that apart from the Independent and the FT and BusinessGreen, which briefly talked about this, other editors couldn’t be bothered. Sky, ITV, BBC etc. were all mute on one of the doyens of the City advice of the annihilation of economic growth.
 
Environmental circles have been having debates on if it is possible to shock people into taking action via doom-laden warnings of the impacts of climate or if climate based communications can be seen through the prism of #climateOptimism. The grey ground in the middle is most likely to hold the answers as it always has in similar mind-numbing binary arguments. A grown up assessment, as well as a realistic assessment of the potentially catastrophic risks; and recognition that there may be a way to avert these risks and help everyone to a happier, better economy. It is even more crucial that the doom-hope dialectic be got right when talking to the business and political audience that are the ultimate determinant of the temperature trajectory that will be formed in this century.
 
With the attractiveness of clean technology becoming more compelling, Schroders clearly identified in this report that the gap between tangible policy measures and the political rhetoric is fast diminishing. It also stated that although it may be difficult, the 2C trajectory is still within reach. That said, it will still require a major transformation of businesses and investments to achieve this. Every sector of the economy, not just those that are obviously exposed will surely feel the effects of this cut in emission.
 
Both risks and opportunities should be focused on when climate change is discussed. However, with the political and media underplaying of the major problem being faced as well as its keenness to disregard warnings that ought to enjoy full-scale domination of the public realm, you wouldn’t blame anyone for accepting any form of serious climate engagement. This implies that the imagination can stop an actual response be begun in a way that can be deemed commensurate to the challenge at hand.
 
If a person like Schroders is telling you there is a problem, you must believe him. Silence on the issue is no longer acceptable.