The view from Davos

Last week the annual World Economic Forum meeting was held in Davos, Switzerland. This year was the 50th anniversary of this event, which groups together global business leaders, politicians and personalities – you could call them the world’s elite.

Before the meeting the World Economic Forum publishes a risks report, something it has been doing for 15 years. A year of extreme weather events, increasing scientific evidence of global warming and climate change, and moral suasion from young activist Greta Thunberg have brought the issue of climate emergency to the forefront. In fact, the environment filled the top five places in the list of concerns likely to have a major impact over the next decade, including on the economy. 

Everyone must play their part to mitigate global risk

The top five risks identified by global experts and decision makers, 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; and major natural disasters such as earthquakes, tsunamis, volcanic eruptions, and geomagnetic storms.

For some of us, including myself, this could all sound very alien – but the message is very clear. Climate change will impact the economy negatively, and therefore there is an urgent need to adapt faster to climate change in order to avoid the worst and irreversible consequences and to protect biodiversity.

The Davos meeting itself focused greatly on the issue of climate change and global warming, and in spite of derogatory remarks by some political leaders, it would seem that the penny has dropped for business decision makers. Some commentators said that what was surprising was that the financial sector, including global banks, are now understanding the risks of global warming and are starting to change their behaviour accordingly.

Microsoft has stated that it plans to go carbon negative by 2030 and Blackrock, the world’s biggest asset manager, committed to put the issue at the heart of its investment strategy.

On the last day of the meeting there was a discussion between European Central Bank president Christine Lagarde and US Treasury Secretary Steven Mnuchin. This discussion highlighted the opposing opinions which there are on this issue between Europe and the US. The view of the president of the European Central Bank is that it is vital to include climate risks in economic forecasts because these risks are real.

Tackling the impact of climate change and global warming on the economy requires a multilateral approach. Unfortunately, nowadays, political leaders around the world seem to give less importance to such an approach. A multilateral approach had helped the world economy to cope with the financial crisis of 2008. Political leaders have retreated from such an approach and as such it has become more difficult to tackle this global risk.

On the other hand, everyone must play their part to mitigate this risk. It is not just an economic must; it is also the right thing to do for the common good.