1.5C threshold breach reinforces climate change threat to economic growth

by | Feb 8, 2024

Today’s news from the EU’s Copernicus’ Climate Change service that the 1.5C threshold for CO2 emissions above pre-industrial levels has been breached for a full consecutive year, has alarmed many across the globe. Clearly the fight against climate change is set to get all the more challenging in the months and years ahead.

In this analysis, Tara Clee, ESG analyst, Hargreaves Lansdown, reminds us why it’s vital that investors are aware of the risk the climate change poses to their portfolio given that climate change is expected to wipe 3.3% off the UK’s GDP by 2050. She comments as follows:

“The UN strive to keep 1.5C alive, yet for the first time, the world has now exceeded this critical mark for a consecutive year. This pivotal moment urgently calls for an acceleration in action from policymakers.

Climate change is expected to wipe 3.3% off the UK’s GDP by 2050 and 7.4% by 2100. On top of this, foreign trade will cause a further 1.1% fall in UK GDP as other countries experience the impacts of this crisis.

Insufficient mitigation, adaption and resilience on climate change also carries significant financial risks. Extreme weather and natural disasters, policy disruptions, disorderly transitions and reputational fallout could leave businesses vulnerable, impacting investor returns and consumer trust.

Despite commitments to climate action, current policies are falling short. If all countries achieve their climate pledges, oil & gas demand falls by 45% by 2050. We need global demand to plummet by 75% to align with the 1.5C target.

Limiting global warming to 1.5C is paramount to averting the catastrophic impacts of global heating. The drive towards net zero will bring about cleaner energy sources, healthier ecosystems and a more sustainable and resilient future for all.

It’s vital that investors are aware of the risk climate change poses to their portfolio and recognise the opportunity in directing their savings to businesses on the forefront of delivering the necessary emissions reductions.”

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