Climate change threatens to impact the world in a whole variety of different ways. Habitat destruction, rising sea levels, extinction of different species, unlivable cities, the list unfortunately goes on and on. Yet for some people, this warning isn’t the most convincing argument for trying to reduce the level of climate change. To some, the amount of money that could be lost along the way is the most worrying factor.
Why does climate change even affect the global economy? This comes down to a whole host of different reasons that altogether create a big economic impact. If climate change increases the intensity and destructiveness of weather events such as hurricanes, then this means greater damage to people’s houses and buildings. A changing climate also impacts agriculture, with changes in rainfall, temperature and the land affecting farmers. Rising sea levels threaten coastal areas and could see huge amounts of damage to infrastructure and buildings. Climate group Greenpeace estimates that nearly 3 million people will be affected by sea level rises in Taiwan by 2050 and 1,400km² of Taiwan will be underwater. Altogether, research from the Swiss Re Institute shows that if we continue on our current trajectory, the global economy could lose 10% of its value by 2050.
Yet still, when discussing different climate policies and whether to implement them, critics sometimes make the argument that these climate policies will be expensive to start. For example, coal is a very cheap fuel, especially when compared to the upfront costs required to build renewable energy infrastructure such as wind turbines. Many organisations are reluctant to take their investments out of places such as oil companies because they are seen as stable, lucrative investments. Because of this, sticking to the status quo and not investing in sustainability projects is often a tempting option. There are simply too many short term economic barriers that put people, organisations and even governments off of sustainability.
As the impacts of climate change become more and more apparent though, people are realising that the short term costs of sustainability are outweighed by the long term economic impacts of climate change. Next year, for the first time ever Taiwan’s banks are being forced to undergo compulsory climate change stress tests. These tests are currently being designed, and the aim of them is to try and assess what kind of impact climate catatrospheres might have on their assets. This includes things such as rising sea levels and the danger this poses to real estate.
Banks in other countries have undergone similar stress tests recently. For example, the Bank of England recently calculated that British banks could see losses of around $420 billion USD in the next thirty years as a result of climate change. Despite this, there is still a lot of scepticism surrounding climate change in the financial industry. At a Financial Times event last month, HSBC’s head of responsible investment said that these kinds of predictions are blown way out of proportion and that climate change won’t have this kind of impact. Since that point, he’s been suspended from HSBC and criticised from all angles, but he is certainly not the only person in a position of financial power that holds that view.
Ultimately, the debate around the economic costs of moving to a more sustainable world is a frustrating one. Sustainability means making a world that will be able to continue to support human life. If the world can’t sustain human life any more then there’s little point in trying to save money now. Of course, a complete climate catastrophe that sees the extinction of the human race is hard to imagine and is a hard perspective to argue from. What’s not hard to see however is the current impacts of climate change. In April 2021, the United Nations High Commissioner for Refugees published data that showed that since 2010, the number of climate refugees has risen to 21.5 million. These refugees are people who have had to flee their homes because of climate change-related disasters. There will of course be upfront costs for individuals, businesses, banks and governments if we try to move to a more sustainable model of living. In the end though we not only stand to lose a lot of money if we don’t, but we also stand to lose our world.