The latest edition of the annual World Economic Forum (WEF) Global Risks Report has found environmental outbreaks to be a bigger threat to the economy than pandemics and wars. Cybersecurity and space are emerging risks to the global economy, adding to existing challenges posed by climate change and the coronavirus pandemic, the WEF said.
Climate change was seen as the number one danger by respondents in the WEF’s annual risks report, while the erosion of social cohesion, livelihood crises and mental health deterioration were identified as risks that had increased the most since the start of the Covid-19 pandemic. Environmental risks—in particular, extreme weather and climate action failure—appear as top risks in the short, medium and long-term outlooks.
“Global leaders must come together and adopt a coordinated multi-stakeholder approach to tackle unrelenting global challenges and build resilience ahead of the next crisis,” said Saadia Zahidi, WEF Managing Director.
The most serious challenge persisting from the pandemic is economic stagnation. The macroeconomic outlook remains weak, with the global economy expected to be 2.3% smaller by 2024 than it would have been without the pandemic.
Governments, businesses, and societies are facing increasing pressure to transition to net-zero economies. An aggressive and rapid transition would alleviate long-term environmental consequences but could have severe short-term impacts, such as putting millions of carbon-intense industry workers out of jobs or triggering societal and geopolitical tensions, the report says. Growing insecurity in the forms of economic hardship, worsening impacts of climate change and political persecution will force millions to leave their homes in search of a better future, it adds.
Presently, the biggest threat faced by the global economy is extreme weather, biodiversity loss and a global failure to tackle climate change. In the next 24 months, extreme weather conditions will be the largest risk to economic stability, posing a bigger threat than the rising cost of living, poor mental health and cyber security.
Peter Giger of the Zurich Insurance Group said, “The climate crisis remains the biggest long-term threat facing humanity. Failure to act on climate change could shrink global GDP by one-sixth and the commitments have taken at COP26 are still not enough to achieve the 1.5 C goal.”
The latest Global Risks Report is based on a survey of nearly 1,000 business, government and academic leaders. The report was produced together with Zurich, Marsh McLennan and South Korea’s SK Group, the universities of Oxford and Pennsylvania and the National University of Singapore. According to WEF, the risk ranking is increasing each year, informed by assessments from several major insurance and reinsurance companies, focus workshops, interviews and a survey of internationally recognised experts.