Investments in the world's fastest growing cities face the biggest risk from climate change, according to analysis by Verisk Maplecroft
Companies investing in the world's 100 fastest growing cities are likely to face the biggest threats to their business from rising temperatures and increasingly severe weather events caused by climate change over the next 30 years.
That is the headline conclusion from the latest annual Climate Change Vulnerability Index from Verisk Maplecroft, which will be published later today.
The influential report found that of the 100 fastest growing cities by population, many of which are located in Africa and Asia, 84 are rated as facing 'extreme risk' and 14 are facing 'high risk' from the changing climate.
Major physical risks to investments cited include damage to infrastructure, property and assets caused by tropical cyclones or flooding, all of which are set to become more severe and frequent in the coming decades due to ongoing climate change.
And in addition to these physical risks, the research places equal significance on the potential disruption caused by secondary threats exacerbated by climate change, such as disease, crime and civil unrest. It also assesses the impact of drought, crop failure and instability brought by climate change on driving large numbers of people towards cities through cross-border and rural migration.
It means global warming poses significant threats to business and economies in climate vulnerable regions in Africa and Asia, where 95 per cent of the 234 cities considered at 'extreme risk' in the Index are located.
The report adds to a growing bulk of evidence suggesting the world's poorest countries are, in contrast to the world's richest, set to pay the highest price from rising temperatures. For example, it comes just weeks after the UK's Ministry of Defence published its latest Global Strategic Threats analysis, which repeatedly emphasises how climate change and environmental stress could lead to a raft of increased security and instability risks in the coming decades.
Did you know that the British military has its own think tank? It's the Development Concepts and Doctrine Centre. It regularly reports on Global Strategic Trends, most recently in mid October. I just got round to reading it. Here's the report https://t.co/fBFfJiqzFn 1/n— Leo Murray (@crisortunity) November 13, 2018
Today's Verisk Maplecroft emphasises how urban climate impacts will have significant implications for major corporates operating on a global level with supply chains throughout the world.
The scale of risk could threaten capital flows that have streamed into African and Asian markets, as well as parts of Latin America and the Middle East, to take advantage of burgeoning economies, emerging middle class consumers, and cheap labour, explained Richard Hewston, principal climate change and environment analyst at Verisk Maplecroft.
"Businesses operating in megacities have to understand the physical risks in the short, medium and long- term," he said. "They must work to build their resilience to climate shocks, not only to protect their assets and people, but also to satisfy investors that are increasingly factoring climate risk into their investment process."
The analysis combines Verisk Maplecroft's 2018 Climate Change Vulnerability Index with new UN annual population growth forecasts for more than 1,800 cities alongside GDP projections from the IMF in order to help assess the potential financial impacts on business and economies.
It concludes 86 of the 100 fastest growing cities in the world are in Africa, of which as many as 79 are rated at 'extreme risk' in the Index. These include Kampala in Uganda, Dar-es-Salaam in Tanzania, Abuja and Lagos in Nigeria, Addis Ababa in Ethiopia, and Luanda in Angola, where populations are all set to continue surging over the coming decades.
The research points to a strong relationship between high population growth rates and climate change vulnerability, with cities already lacking adequate healthcare services and natural disaster mitigation systems likely to face even greater strains on essential services as populations increase.
Yet many of these regions and countries are also the fastest growing economies in the world. The International Monetary Fund (IMF) estimates eight of the top 10 fastest growing economies between 2018 and 2023 will be African countries.
That means companies investing in these markets could face a set of costly risks as the impacts of climate change bite harder in the coming years, the research warns, highlighting the need for climate-resilient city infrastructure.
It calculates the amount of GDP in African countries exposed to 'extreme risk' in the Index will grow from $895bn this year to almost $1.4tr in 2023, which represents nearly half of the continent's entire GDP.
Yet in stark contrast to the climate threat in developing regions, 86 per cent of the 292 'low risk' cities in Verisk Maplecroft's Index are located in Europe and the Americas.
The five cities considered most insulated from the impacts of climate change in the Index - Glasgow, Belfast, Edinburgh, Preston and Middlesbrough - are all located in the UK, while other top resilient cities in Europe include Hamburg, Brussels, Copenhagen and Amsterdam.
It comes as the European Commission prepares to launch a 'risk data hub' in the coming months aimed at mapping out loss and damage from climate-induced natural disasters such as floods, droughts, and storms.
"Cities that are already vulnerable to climate impacts are likely to face an increased level of risk if populations continue to inflate, putting additional strain on limited vital resources," Verisk Maplecroft concludes. "While population growth might present opportunities in more economically developed countries, it acts as a risk multiplier in lower income cities with poor public infrastructure and inadequate disaster response mechanisms."
Nevertheless, rapidly growing urban populations are set to have a major impact on global economy, and the entire planet's ability to tackle climate change and its impacts in future, according to separate analysis yesterday spearheaded by green NGO The Climate Conservancy (TNC).
It warns that increasing global urbanisation driven by rising population growth in cities is set to swallow up vast swathes of land and wildlife habitats, with potentially significant ramifications for the planet's ability to store carbon dioxide.
The report estimates a 230,000 square kilometre habitat area - an area larger than New Zealand - could be lost to urbanisation over the next 20 years, with urban sprawl potentially releasing stored CO2 equivalent to one year's emissions from 931 million cars.
Habitat loss could be especially significant in forested areas of Brazil, China, Indonesia and the US, with people and wildlife in coastal regions particularly exposed to extreme weather, explained Dr Rob McDonald, lead author of the report and TNC's lead scientist for global cities.
"We are living in an increasingly urban century, with at least 70 per cent of humans likely to live in cities by 2050 - an additional 2.4 billion people," he said. "If current growth trends continues, by the end of this century we could see an area of habitat larger than New Zealand becoming urbanised, raising obvious questions not only in terms of wildlife biodiversity but also human health and wellbeing. Cities themselves are not the problem - unsustainable planning very much is."
Swathes of evidence already points to the toll climate change is expected to take on developing nations, which at the same time require the most significant sums of investment in order for the world to meet the UN's 17 Sustainable Development Goals (SDGs). That, of course, places businesses with interests in such regions at significant risk of disruption, esclating costs, and stranded assets.
In an increasingly global economy where human health, resilience and political stability are all at risk from climate change, the case for governments and businesses - even in less vulnerable, developed nations - to step up investment in low carbon, climate-resilient urban infrastructure is becoming ever clearer.
UK insurers will be called upon next month by the Prudential Market Authority to stress test their business against a range of climate and transition risks
As ClientEarth warns too many councils have missed deadlines to submit air quality plans, government confirms fresh support from its Clean Bus Technology Fund
Environment Agency chair Emma Howard Boyd's speech at the European Bank for Reconstruction and Development - in full
Britain has its first new deep coal mine in decades - a result of pretending climate change isn't political
Rebecca Willis argues the controversial decision to approve a new coal mine in the UK is symptomatic of a wider political failure