INTHEBLACK July/August 2023 - Magazine - Page 43
“The most recent modelling estimates that, with the acceleration in climate change,
by the time we get to 2070, we’ll be having the equivalent of a COVID-19-size
downturn every year. That’s a decline in GDP of 7 per cent on average each year.”
NICKI HUTLEY, CLIMATE COUNCIL
World Economic Forum’s network. More than
four in five respondents anticipate persistent
volatility over the next two years.
While the cost‑of‑living crisis is ranked
as the most severe global risk over the next
two years, failure to mitigate climate change
tops the list over a 10‑year period. In fact,
climate‑related issues also rank in the top four
longer‑term risks.
Climate risks flow right through the
economy, Hutley notes. “The most recent
modelling estimates that, with the acceleration
in climate change, by the time we get to
2070, we’ll be having the equivalent of a
COVID‑19‑size downturn every year,” she
says. “That’s a decline in GDP of 7 per cent
on average each year.
“We’re talking about trillions of dollars
in lost economic activity over the next
couple of generations as climate change
worsens, if we don’t meet the Paris targets
or at least get very close to them.”
SUSTAINABILITY AND RESILIENCE
Sustainable business practices can often help
to insulate organisations from some of the
worst effects of a crisis. However, some events,
such as the 9/11 terrorist attacks and the
Fukushima nuclear disaster, are so extreme
and unexpected that preparation is impossible.
Gartner research has found that 85 per cent
of investors are taking environmental, social
and governance (ESG) factors into account
when investing. The research has also revealed
that 91 per cent of banks monitor ESG
performance of investments.
Research from McKinsey has shown that
a strong environmental performance can help
to delay a company’s rising operating expenses,
including the true costs of water, carbon
and raw materials. It also reveals a significant
correlation between a company’s resource
efficiency and the strength of its financial
performance.
However, as business leaders aim to shield
their operations from economic downturn,
indicators suggest ESG progress is stalling.
According to a 2022 KPMG report,
50 per cent of CEOs have paused or are
Global risks,
ranked by severity
NEXT TWO YEARS
NEXT 10 YEARS
1
Cost-of-living crisis
Failure to mitigate climate change
2
Natural disasters and extreme
weather events
Failure of climate change
adaptation
3
Geoeconomic confrontation
Natural disasters and extreme
weather events
4
Failure to mitigate climate
change
Biodiversity loss and ecosystem
collapse
5
Erosion of social cohesion and
societal polarisation
Large-scale involuntary migration
6
Large-scale environmental
damage incidents
Natural resource crises
7
Failure of climate change
adaptation
Erosion of social cohesion and
societal polarisation
8
Widespread cybercrime and
cyber insecurity
Widespread cybercrime and cyber
insecurity
9
Natural resource crises
Geoeconomic confrontation
10
Large-scale involuntary
migration
Large-scale environmental damage
incidents
Source: World Economic Forum, Global Risks Perception Survey 2022-2023
reconsidering existing or planned ESG efforts.
By the time of the report, 34 per cent had
already done so.
Patrick Viljoen CPA, senior manager ESG
at CPA Australia, says sustainability intersects
with many of the current crises.
“A lot of organisations – and a lot of people
– still view ESG as an issue on the periphery
and that sustainability is not part and parcel
of an organisation.
KEY
Environmental
Geopolitical
Societal
Technological
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