A new risk assessment by the Network for Greening the Financial System (NGFS) warns that the physical shocks from climate change, such as flooding, droughts, and rising temperatures, could reduce global economic growth by a staggering one-third by 2100.
This alarming estimate marks a significant increase in predicted economic damage, driven by more granular climate and economic modeling.
The NGFS, a coalition of central banks and financial organizations, highlights that the impact of extreme weather events has escalated substantially.
A prime example is the catastrophic floods in Valencia, which claimed over 200 lives and caused business losses exceeding €10 billion.
Despite the improved methodology used in the report, experts believe the actual risks might be severely understated.
Sandy Trust, an actuary focused on sustainability, criticized the study for omitting critical factors like climate tipping points, human health impacts, and biodiversity loss.
Trust emphasized that while the predicted damage is severe, it fails to capture the full scale of potential economic devastation.
Experts warn underestimated risks from climate tipping points threaten global economic stability.For instance, the melting of Greenland’s ice sheet or Amazon deforestation could trigger irreversible and accelerating climate changes, amplifying economic and environmental risks.
The NGFS report predicts over 30% economic losses due to a 3°C rise in global temperatures, a dramatic leap from earlier estimates of just 2%.
However, the group cautioned that future outcomes might be worse, particularly if critical tipping points are reached.
“Tail risks” like these, along with other unaccounted factors, suggest that global economic resilience to climate shocks remains far weaker than many assume.
Underestimating these impacts poses a grave danger.
Trust likened the oversight to ignoring lifeboat shortages on a sinking Titanic: visible risks are acknowledged, but the underlying systemic threats are overlooked.
As global temperatures continue to rise, the call for more robust climate risk modeling and decisive mitigation measures becomes ever more urgent.