KPMG REPORT SUMMARY: "Global Economic Outlook

Time is running out and every day the goal set in the Paris Agreement to prevent a 1.5° C increase in global temperature from rising by 1.5° C seems further away.

Drastic changes in climate are already observable worldwide, with increasing natural disasters, floods, fires and droughts being some of the tragedies that are increasingly observed as a consequence of rising temperatures.

But what are the economic costs of these changes, and are there opportunities to create more resilient and sustainable economies? To answer this question, we share with you the most important aspects highlighted by the consulting firm KPMG in the "Global Economic Outlook" report, which explores the outlook for the global economy, including the economic consequences linked to the climate crisis. After reading it, it is more than clear that sustainability is an issue that must be addressed with greater commitment from companies and governments.

Losses due to natural disasters

According to the World Meteorological Organization, 11,000 natural disasters attributed to climate change have been reported worldwide in the last 50 years alone. These have caused economic and human losses, as around 2 million people have died and 3.6 million dollars have been lost in property damage. While in 2020, as a result of hurricanes, forest fires, floods and droughts; 210 billion dollars were lost.

The report also shows that emerging market countries had the highest number of uninsured losses, while 71% of recorded natural disasters occurred in developing countries, despite the fact that the highest percentage of carbon emissions come from industrialized countries.

If efforts to reduce carbon emissions are not accelerated, deadly natural disasters will become increasingly frequent, causing volatility in agricultural productivity and crises that will be difficult to overcome.

Mitigation and transition costs

This is due to the need to increase investment in the energy sector in order for countries to achieve the goal of zero carbon emissions (according to the International Energy Agency, an average annual increase of 2 trillion dollars is required over the next 5 years), which represents a significant challenge for countries with emerging economies that are still facing high fiscal costs due to COVID-19.

Due to the current situation, in order to cover the transition costs, measures must be taken:

1. Increasing industrialized countries' investment in climate resilience funds and development of new renewable energy sources in emerging market countries.

2. Exceeding the current level of private investment in clean energy

3. Publish more transparent data on efforts to combat climate change

4. Implementing policies that discourage the use of carbon-emitting energy sources

Opportunities for improvement

Other aspects highlighted in the report are the high levels of inflation, imbalances in the economy as a consequence of crises in global supply chains, and the effort of governments to mitigate the impact of Covid-19, but this global economic crisis can become the perfect opportunity to rethink economic models and focus efforts on the circular economy to mitigate the impact of such problems and start building stronger and more sustainable economies.

The Report highlights some exemplary initiatives such as the implementation of carbon emission reduction policies by China and the creation of the NextGenerationEU program, which promotes investment for climate transition in the Eurozone. In addition, an improvement in 2 equity indices was observed in India, indicating that despite the pandemic, progress can continue to be made on sustainability issues.

Although in the rest of the countries there is still much to be done in terms of sustainability (for example, the United Kingdom still does not allocate long-term resources for climate change), the fragility of the linear economy is once again evident in this report, so the results of this report should be an invitation to continue demanding policies on sustainability and implementing changes aimed at opting for the circular economy in companies at all levels.