The impact of climate change on the global economy
Schroders Economics Team examine how climate change will shape the global economy.
Drawing on the comprehensive research done over the past two decades, Keith Wade and Marcus Jennings of the Schroders Economics Team examine how climate change will shape the global economy. In their view, global growth will be hindered by rising operational costs as global temperatures rise, with studies suggesting that a worst-case impact of a 1% reduction in GDP growth per year could be realized. Research also suggests that the impact will be disproportionately damaging to developing economies, and only through a collective effort to enact strict carbon emissions policies can the long-term fi nancial repercussions of climate change potentially be ameliorated.
Assessing the impact of climate change is, at best, an extremely complex exercise with uncertainty about both the degree of future global warming and the subsequent impact on global activity. There are clearly some benefi ts as well as costs as the planet warms. There is also the unknown of how technological progress will respond and potentially alter the path of global warming. Any assessment also involves taking a very long-run view, well beyond that normally used by fi nancial market participants. However, increasing awareness of the issue means there is a growing demand for a view from shareholders who are either concerned about how the companies they own impact the environment, worried about the effect of climate change on the value chain of those companies, or a combination of both.