Big emerging economies are most at risk of climate change

A new study has produced a global ranking which shows the vulnerability of 170 countries to the impact of climate change over the next 30 years. The Climate Change Vulnerability Index (CCVI), from Maplecroft, is designed to enable organisations to identify areas of risk within their operations, supply chains and investments. It also serves as a good measure of where climate risks are going to grow creating both risk and opportunity for the insurance and reinsurance markets.

The index evaluates 42 social, economic and environmental factors to assess each country across three core areas. These include: exposure to climate-related natural disasters and sea-level rise; human sensitivity, in terms of population patterns, development, natural resources, agricultural dependency and conflicts; thirdly, the index assesses future vulnerability by considering the adaptive capacity of a country’s government and infrastructure to combat climate change (we assume that includes their risk management preparations).

The index picks out 16 countries as ‘extreme risk’, this group includes what we think of as up and coming Asian powerhouse economies such as India, the Philippines, Thailand and Vietnam. These countries have significant risk to climate change and are still developing and modernising quickly which makes their economic exposure huge and also makes the opportunity for risk transfer huge. They attract high levels of foreign investment and multinational organisations are setting up operations there, these now face significant risk from the climate and so have a need for risk transfer. There is also a need for microinsurance to help nationals of these countries protect themselves against the increasing frequency of disaster.

In the ‘high risk’ category we find countries such as Brazil, China and Japan. The UK, France, Germany and the U.S. are all classed as ‘medium risk’.

Studies like this demonstrate the risk posed by climate, whether changing or not, and help to show how emerging economies face increasingly high risks as their economies develop and modernise. Read more about this study here from Maplecroft.