A recent risk assessment conducted by a network of central banks has revealed alarming find
ings regarding the impact of climate change on global economic growth.
According to the study, the physical shocks caused by climate breakdown—such as extreme flooding, droughts, and rising temperatures—could reduce the world’s economic output by up to a third.
This significant increase in the predicted economic damage is based on new climate modeling, which incorporates the most up-to-date datasets available.
The Network for Greening the Financial System (NGFS), an alliance of global banks and financial organizations, has highlighted the growing severity of the risks posed by climate change.
Central bank report reveals alarming economic risks, highlighting the need for urgent climate action.The report underscores how the damage from these physical shocks is expected to escalate, warning that the risks to economic stability are far more significant than previously anticipated.
In addition to the immediate damage from extreme weather events, such as the catastrophic flooding in Valencia, which caused over €10 billion in business losses, experts are concerned about the long-term economic consequences.
While the report highlights the physical risks, critics argue that it still underestimates the true scale of the problem.
Sandy Trust, a sustainability actuary, pointed out that the report fails to account for key factors like climate tipping points, sea temperature rises, and the broader socio-economic impacts of climate change, including mass migration and conflicts.
The report projects that by 2100, with a 3°C rise in global temperatures, the economic loss could be as high as 30% of global GDP.
Despite the findings, experts warn that the true economic impact could be even worse if critical tipping points, such as the melting of the Greenland ice sheet or the deforestation of the Amazon, are reached.
As climate risks continue to grow, the global economy faces an uncertain and potentially devastating future.