Businesses must act on climate change, says World Economic Forum

Governments must work together to pressure business to take action on climate change because ‘the longer we wait, the more painful the transitional period will be’, are the findings of the latest World Economic Forum’s Global Risks Report

Speaking at the launch of the World Economic Forum report, John Drzik, chairman of Marsh & McLennan Insights, said: ‘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.

‘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.’

On a more positive note, Drzik said: ‘Businesses now need to focus on the opportunities that stem from climate change’, adding that expanding markets in ‘renewable energy’ for example, and ‘other opportunities will emerge’.

In the report over 750 global experts and decision-makers were asked to rank their biggest concerns in terms of their likelihood and impact on business and society. More than three quarters (78%) said economic confrontations, particulary trade wars, and domestic political polarisation were major concerns which are likely to rise in 2020. Respondents also said the third biggest issue would be extreme heatwaves, with 77% seeing this as a short-term risk.

Tax interventions

One tool which could be used at a global level to tackle climate change is tax, argued Børge Brende, president of the World Economic Forum.

He said that governments should move from ‘red taxes to green taxes’, a strategy which means a government would levy taxes on polluting companies in order to provide an incentive to take climate action.

Brende added: ‘The reality is that leaders have to look at the domestic tools that you have available, and of course taxes are one of them.

‘We also have to look at the situation where some of us are paying low taxes, and you also have to look at people that are under pressure, feeling that their salaries are too low and inequalities have been brewing in the wrong direction.

‘They also have to have a package related to what they would benefit from, not only from the long-term positive effects for their children, but also that they would come out in an okay way when it comes to this year’s salary.’

Peter Giger, group chief risk officer, Zurich Insurance Group warned that companies need to adapt faster to avoid the worst and irreversible impacts of climate change and to do more to protect the planet’s biodiversity.

‘Transitionary risks are real and everyone must play their part to mitigate them,' Giger said. 'It is not just an economic imperative; it is simply the right thing to do.

‘Biologically diverse ecosystems capture vast amounts of carbon and provide massive economic benefits that are estimated at $33 trillion (£25 trillion) per year – the equivalent to the GDP of the US and China combined.

‘It is 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.’

The report forecasts a year of increased domestic and international divisions and economic slowdown, with geopolitical turbulence propelling the world towards an unsettled unilateral sphere of great power rivalries, at a time when business and government leaders must focus urgently on working together to tackle shared risks.

Giger added: ‘The longer we wait, the more painful the transitional period will be, and the technological transition will cause straining of assets.’

The World Economic Forum annual summit will be held 21-24 January 2020 in Davos. Influential speakers set to attend Davos include climate and environmental activist Greta Thunberg and US president Donald Trump with the theme of the event focusing on how to achieve a sustainable world.

World Economic Forum Global Risks Report 2020

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