As much as $1.14 trillion in global corporate value is located in countries that are set to experience the greatest socio-economic impacts from climate change, a new report by Verisk Maplecroft has found.
The strategic consulting firm’s Climate Hazard and Vulnerability Index (CHVI) found that climate-associated risks such as political instability, poverty, migration and food insecurity have the potential to become ‘highly impactful’ in 48 countries by 2050.
Based on the current locations of assets and market capitalisation valuations, this would lead to a ‘dramatic’ increase in the financial exposure of both companies and investors in the S&P 500, DAX, CAC 40, Nikkei 225 and FTSE 100 indices.
In compiling its findings, the CHVI evaluated three core factors: exposure to climate hazards, the vulnerability of populations due to health, poverty and reliance on agriculture, and national adaptive capacity, including institutional strength and economic resilience.
Emerging market countries are set to be the hardest hit by an ‘intermediate emissions‘ scenario, where average global temperatures are likely to rise by up to 2.7°C, it noted, including countries in which swathes of corporate assets are located, including India, Nigeria, Kenya, Bangladesh and Pakistan.
‘A blind spot’
“While many companies report on their physical exposure to climate hazards, lesser understood socio-economic factors do not feature as part of corporate strategies, creating a blind spot for long-term resilience planning,” commented Will Nichols, head of climate and resilience, Verisk Maplecroft.
“As the severity of climatic events accelerate, socio-economic factors could pose as big a risk as physical disruptions.”
Emerging market investment
Among the countries ranked ‘very high’ risk by the CVHI, several emerging market investment destinations come into view, including Ethiopia (ranked 21st highest risk), Kenya (35th), Bangladesh (40th), India (41st) and Pakistan (48th).
Indonesia (53rd) and the Philippines (58th) rank just outside the ‘highest risk’ category.
“The interconnected nature of modern corporate operations, supply chains and investment networks means that disruption brought about by climate change in the most exposed jurisdictions will have a major impact the world over,” Nichols added. Read more here.
