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Reading Between the Lines of the 2020 Global Risks Report: Smarter investment for climate and the environment is required


The World Economic Forum's (WEF's) Global Risks Report 2020 has caused quite a stir since its publication on January 15th. The report, published annually by the World Economic Forum, presents the findings from the Global Risk Perception Survey, which asks WEF members to rank the greatest risks facing society today and includes risks relating to technology, the environment, society, politics and economics. Respondents are asked to assess risks for "likelihood" and "impact." 

This year, for the first time in the report’s 15-year history, environmental risks take the top five spots for "likelihood" and the top three for "impact." "Water crisis" and "weapons of mass destruction" complete the top five places in the "impact" category. Interestingly, the technological risks of "cyber attacks" and "data fraud," evident in the 2019 report, have dropped out of the top five standings. 

Consensus has emerged that a climate emergency is ongoing. 

The top five environmental risks are as follows; extreme weather, climate action failure, major biodiversity loss, major natural disasters and human-made environmental disasters (such as oil spills). 

Even if the report’s findings should be welcome encouragement that the world has woken up to the impending climate change societies are faced with, the reality is far from it. The report goes on to highlight how political and social instability, driven by global economic stagnation, risk undermining effective (and required) multistakeholder action. With social fragmentation and nationalism on the rise, the risk is that policy-makers will be forced to pursue more unilateral policies, deprioritizing collective action on the environment. It seems that economic stagnation, the driver of civil unrest and social fragmentation, is worryingly absent from the top five places.  

The report is a shocking reminder of the risks we face in both the short and long terms. But just as these risks are humans' own doing, the solutions are within our grasp. More than ever, the investment community needs to better channel capital into funds, firms and projects with strong environmental, social and governance criteria. The capital exists, but it needs to be targeted and invested alongside smarter policies that apply technology in efficient ways that maximize positive environmental outcomes. A report by the World Bank analyzes numerous pathways to meeting the  2° Celsius target set out by the Paris Agreement and shows that many decarbonization pathways can yield higher rates of return than more-polluting alternatives. 

Smarter investment on sustainability is required. This is particularly pertinent at a time when the European Parliament is set to vote on spending EUR 29 billion on 32 gas projects deemed "unnecessary" from a security of supply point of view, locking in technology that will continue to contribute to what is now considered the greatest threator five threatsto our living environment.