As interest in responsible investing rises among investors and asset managers alike, a few key ESG concerns have come to the fore. Among those is climate change, which many experts agree have critical implications for investments, particularly those based on real assets like land and infrastructure.
To avert a doomsday scenario, there’s been a growing push for investors to get tougher on companies that fall short in terms of carbon emissions, plastic waste, and water risks. But even with such efforts, some predictions the writing’s already on the wall — and some countries will be worse off than others.
A new report from Moody’s analytics tried to assess the economic impacts of different climate-change scenarios in the coming decades, said CBC News. Building on work released by the UN’s Intergovernmental Panel on Climate Change last fall, Moody’s concluded that containing the global temperature rise to one degree Celsius is out of the question; instead, the world is increasingly likely to face much more drastic upticks.
Looking at different potential negative impacts of climate change — including rising sea levels, human health effects, and heat effect on labour productivity — the analytics firm attempted to assess the likely economic impact based on different temperature-increase scenarios over the next century.
“[O]ne trend quickly became clear: emerging economies in parts of the world that are already generally warm fare worse,” said CBC News. “Bigger, industrialized economies in the northern hemisphere generally fare better.”
The worst-off country based on Moody’s calculations would be Saudi Arabia. The second largest oil producer is predicted to be hit on tourism and productivity, as well as reduced oil prices that would curtail government revenue. In the worst-case scenario of a 4.1-degree rise in temperature, its economy would shrink by more than 10% by 2048 compared how it would otherwise be; the best-case scenario of a one-degree change would be 0.6% smaller.
Looking at large economies, India is expected to be hit hardest due to a combination of impacts on its large itinerant labour force, agricultural productivity, and human health. Meanwhile, China is projected to take a modest loss between -0.19% and -0.62%.
Interestingly, some countries may actually come out ahead. That cohort includes Canada, which Moody’s said is in a position to squeeze out small gains once tourism demand, crop yields and the growing season, and other pertinent factors are accounted for. In a world that’s 4.1 degrees Celsius hotter three decades from now, Canada’s economy is expected to be 0.3% greater than it would be otherwise; dial it down to a one-degree increase, and Moody’s said there would be roughly no difference from a no-temperature-change scenario.
Other countries that Moody’s said would come out relatively unscathed overall were the US, France, and Germany. The one predicted to be furthest ahead was Luxembourg, whose economy is forecast to grow anywhere from 0.45% to 1.07% across all scenarios.
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