Davos 2020 Report: Climate change tops risks for world in 2020


The world’s elite are set to descend on Davos, a Swiss mountain resort, in the World Economic Forum (WEF). It is an annual gathering of world political leaders, business executives including chief executives of some of the world’s biggest and powerful companies, academics and non-governmental organization (NGO) leaders. The Davos WEF has an image of being an elitist event meant as a networking fest for business leaders.

This year marks the 50th anniversary of the WEF, an NGO forum made up of around 1,000 of the world’s biggest companies and brings together several thousand business and political leaders.

The WEF was founded in 1971 by German economist Klaus Schwab as the European Management Forum to help European businesses have better corporate management by taking into account more influential actors including employees or governments. This year, there will be at least 600 public speakers at the four-day event, which kicks off on January 21. The U.S. President Donald Trump, who is pulling out of the 2015 Paris climate agreement, German Chancellor Angela Merkel and EU Commission President Ursula von der Leyen are among those due to attend the event.

The theme for 2020 is sustainable development, under the slogan “Stakeholders for a Cohesive and Sustainable World”. Among its goals this year: how to respond to climate change and protect biodiversity, remove long-term debt, avoid a “technology war”, empower a billion people with skills over the next decade, and build bridges to resolve conflicts in global hotspots.

Economist and Nobel laureate Joseph Stiglitz, who has attended Davos since 1995, wrote in 2018 that despite surging inequality and climate change, CEOs were only concerned with populist backlash against globalization.

“For the CEOs of Davos, it seems that tax cuts for the rich and their corporations, along with deregulation, is the answer to every country’s problems,” Stiglitz wrote in an opinion piece published by Project Syndicate.

“People are revolting against the economic ‘elites’ they believe have betrayed them, and our efforts to keep global warming limited to 1.5°C are falling dangerously short,” said Schwab in a statement.

“With the world at such critical crossroads, this year we must develop a ‘Davos Manifesto 2020’ to reimagine the purpose and scorecards for companies and governments.”

For the first time, environmental concerns dominated the top five long-term global risks for business leaders, investors and policy-makers surveyed in the WEF’s annual report, published on Wednesday.

The WEF report said the retreat from the multilateral approach that helped cope with the 2008 financial crisis made it more difficult to tackle shared global risks.

It said the top five risks in terms of likelihood in the next 10 years were:

  • Extreme weather events with major damage to property, infrastructure and loss of human life.
  • Failure of climate-change mitigation and adaptation by governments and businesses.
  • Human-made environmental damage and disasters, including environmental crime, such as oil spills and radioactive contamination.
  • Major biodiversity loss and ecosystem collapse with irreversible consequences for the environment, resulting in severely depleted resources for humankind as well as industries.
  • Major natural disasters such as earthquakes, tsunamis, volcanic eruptions, and geomagnetic storms.

The report was released ahead of the WEF’s annual meeting in Davos.

The 750 respondents to the WEF’s 2020 Global Risks Perception Survey ranked extreme weather events, climate action failure, natural disasters, biodiversity loss and human-made environmental disasters the top five most likely risks for the global economy this year – ahead of data fraud, cyberattacks, water crisis, global governance failure and assets bubbles.

The world’s elite also identified climate action failure as the risk with the greatest impact on the global economy. In the short-term extreme heatwaves and the destruction of natural ecosystems were ranked third and fourth as the risks most likely to rise in 2020.

Børge Brende, the president of the WEF, said: “The political landscape is polarized, sea levels are rising and climate fires are burning. This is the year when world leaders must work with all sectors of society to repair and reinvigorate our systems of cooperation, not just for short-term benefit but for tackling our deep-rooted risks.”

“The horizon has shortened for preventing – or even mitigating – some of the direst consequences of global risks,” wrote Brende. “It is sobering that in the face of this development, when the challenges before us demand immediate collective action, fractures within the global community appear to only be widening.”

Brende said there was a need for urgent action.

“We have only a very small window and if we don’t use that window in the next 10 years we will be moving around the deckchairs on the Titanic.”

On Tuesday, BlackRock, the world’s largest fund manager with $7tn in assets, revealed changes to the fund’s investment in a letter to its clients, naming climate change a key factor in affecting economic growth, asset values, and financial markets.

The fund said it would end direct investments in companies generating more than a quarter of their revenues from thermal coal production. However, it will remain one of the largest investors in fossil-fuel companies.

John Drzik, the chairman of Marsh & McLennan insights, which helped to compile the report, said businesses had to step up their action on global heating.

“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 modeled with greater accuracy and incorporated into risk management and business plans.

Peter Giger, group chief risk officer of Zurich Insurance Group, which also collaborates in the preparation of the risks report, said there was a pressing need to adapt faster to avoid the worst and irreversible impacts of the climate crisis and to do more to protect the planet’s biodiversity.

“We are already seeing companies destroyed by failing to align their strategies to shifts in policy and customer preferences. Transitionary risks are real, and everyone must play their part to mitigate them. It’s not just an economic imperative, it is simply the right thing to do,” he said.

“Climate change has become a defining factor in companies’ long-term prospects,” wrote Larry Fink, BlackRock chairman and CEO. “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.”

BlackRock has previously come under fire from climate activists for backing fossil fuel investments and failing to shift its investment strategy in the face of mounting climate emergency. Now, the decision could push other fund managers and companies across the world to consider climate risks in decision-making.

“Climate change is almost invariably the top issue that clients around the world raise with BlackRock,” Fink added.

Highly reported incidents like recent bushfires 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.




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