If you needed a business case for acting on climate change, here it is

A new report warns that without significant action, the global GDP could be halved. Our Environmental Sustainability Lead, Claire Thew, explains.

Combatting the climate emergency isn't just about organisations "doing the right thing for the planet". It's also increasingly about doing the right thing for business. 

This is clearer now than ever before. In fact, it’s something we’ve been discussing with businesses in the North East a lot recently. While it can be difficult for organisations to correlate their own carbon emissions with wider environmental and macro-economic developments, it’s important that we all retain our sense of shared responsibility in the fight to combat the climate emergency. 

If we needed a reminder that climate change has the power to hit the business community in the pocket, it came last week with the release of a new report issued by the Institute and Faculty of Actuaries (IFoA) and the University of Exeter, which outlined the potential financial implications of the climate crisis.

According to the report, climate change could cause a 50% global GDP loss if policymakers continue to bypass the severity of the issue. Havard economist Adrien Bilal explains: 

“There will still be some economic growth happening but, by the end of the century, people may well be 50 per cent poorer than they would’ve been if it wasn’t for climate change.”

Urgent climate change action is needed to save global GDP

With flash flooding, heat stress, infectious diseases and water insecurity all on the rise, these economic implications mark the latest in a series of potentially disastrous outcomes as a result of rising global temperatures.

The IFoA and Exeter report, titled “Planetary Solvency – Finding Our Balance with Nature”, calls for accelerated action from political leaders. It comes after the annual global temperature broke the internationally agreed target of 1.5°C for the first time in 2024, according to the EU’s Copernicus Climate Change Service. This, scientists say, could trigger a number of “tipping points” and cause irreversible damage to the Earth’s systems.

Sandy Trust, lead author and IFoA Council Member, says:

“You can’t have an economy without a society, and a society needs somewhere to live. Nature is our foundation, providing food, water and air, as well as the raw materials and energy that power our economy.

“Threats to the stability of this foundation are risks to human prosperity which we must take action to avoid.”

Tackling global warming would be “overwhelmingly positive” to our economy

Authors of the new report state that the potential economic damages of the climate crisis “already outweigh the mitigation costs required to limit global warming to 2C,” making it a positive financial decision as well as a moral and environmental one.

Without urgent decarbonisation and nature reparation, global economies could suffer a 50% loss in the two decades before 2090. 

Previous estimates of climate change’s impact on GDP often examine risks in isolation, the IFoA says, without looking at the issue as a whole, which is encouraging inaction. For example, a report by Nordhaus and Boyer estimates just a 2% drop in GDP by 2100, and this report is still being used by policymakers today.

Trust calls such estimates “widely used by deeply flawed”, equivalent to carrying out a risk assessment of “the impact of the Titanic hitting an iceberg” without considering “the shortage of lifeboats and death from drowning or hypothermia.”

The economic implications of climate change can no longer be ignored

‘Planetary Solvency’ is not the only report to highlight the financial implications of ignoring our worsening climate. A report published in May 2024 by the National Bureau of Economic Research (NBER) found that for every 1°C rise in temperature, global GDP could drop by 12%.

The World Bank has also contributed to the outcry for action, stating that weather and climate events caused Europe as much as €650 billion in losses between 1980 and 2022 – over €15 billion per year.

Research from the Network for Greening the Financial System (NGFS) also highlights the issue. Their November 2024 report found that “estimated global losses from (chronic) physical risk are now 2 to 4 times higher globally by 2050 compared to the previous version of the NGFS scenarios.”

So, what now?

Although it’s easy to feel a sense of futility in the face of these macro-economic statistics, it’s crucial for organisations to focus on their own progress and implementing positive changes wherever they can. 

If that’s something your business is keen to explore further but you aren’t sure where to begin, then that’s where we can help at Venture Zero. Through a discovery session we can help to identify both your starting point and easy-to-implement steps that can move you towards a greener, more responsible future.

Ready to start your journey? Let’s talk.