The impact of climate change on growth will be unevenly spread across countries, with many emerging markets such as India bearing the brunt of the consequences while a few developed countries close to the poles remaining mostly untouched. There will be a wide dispersion across sectors in the economy as well. According to the International Monetary Fund (IMF), the median effect of a 1º C annual increase in average temperature on annual GDP per capita growth is minimal for advanced economies, which tend to have colder climates on average.
Fixed Income: Mispricing Creates Long-term Opportunities for Active Investors
There is growing evidence global warming is leading to an increase in storm severity. Warming oceans have created higher-intensity hurricanes in the North Atlantic and cyclones in the South Indian oceans, leading to more storms achieving category 3 or higher intensity.⁴ Indeed, the number of named storms in the Atlantic hit a new record in 2020.⁵
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Public / Private Equity & Venture Capital: Navigating the Green Transition & Game-changing Technologies
The US Department of Defense has cited climate change and a myriad of second order effects – food and water scarcity, zoonotic diseases, climate-induced migration – as “threat multipliers.”44 This will exacerbate existing social and political tensions such as poverty and inequality and even spark new geopolitical conflicts. These knock-on effects from climate-driven stresses are likely underweighted on investors’ agendas.
Real Assets: Deploying Technology to Protect Assets and Uncover Opportunities
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Share of Global Energy Consumption by Source, 2020-2050
Source: “Annual Energy Outlook 2020,” US Energy Information Administration,January 2020.
