The most recent version of the IEA’s World Energy Investment report, which was published on Wednesday, predicts clean energy investment will exceed $1.4 trillion this year and will make up “almost three-quarters of the growth in overall energy investment.”

However, the IEA also pointed out that there is still significant work ahead.

“The annual average growth rate in clean energy investment in the five years after the signature of the Paris Agreement in 2015 was just over 2%,” the report said.

Meanwhile, IEA’s executive director, Fatih Birol, highlighted the challenges and opportunities facing our planet, given current circumstances. 

“We cannot afford to ignore either today’s global energy crisis or the climate crisis, but the good news is that we do not need to choose between them — we can tackle both at the same time,” he said.

“[Clean energy] investment is rising, but we need a much faster increase to ease the pressure on consumers from high fossil fuel prices, make our energy systems more secure, and get the world on track to reach our climate goals.” 

Why ICT operations must be at the forefront of climate change improvement

Compared to fast fashion, fishing with nets, or drilling for oil, the use of ICT and its relationship to carbon emissions is not a well-trodden narrative. However, ICT is expected to soak up 21% of electrical consumption by 2030, with the sector demanding between 5-9% of electrical use worldwide, equating to 3.5% of emissions globally. With internet use increasing by as much as 78% in the last year, mainly due to the pandemic, and a global trend of technological reliance, the environmental effect needs to be understood and efforts should be made to reduce the impact. 

Because ICT has driven innovation that has such a positive impact on personal, social and business operations globally, its utility has often overshadowed the detriment it may have on the environment. However, just like other sectors battling to improve their carbon footprint, there are methods, practices and, indeed, technological changes that can greatly offset ICT’s carbon emissions. 

Storage use and the need to migrate

Legacy systems for businesses such as banks have long relied on domestically owned, stored and operated hardware to facilitate their business operations. Naturally, with these systems in place, their implementation follows a long-standing and often out-of-date methodology that is ill-equipped to adopt new, environmentally friendlier technologies as they arise. Similarly, these systems fall short of optimisation and scaling opportunities when compared to newer advancements, since the legacy hardware operates at a maximum capacity. This means that the energy requirements of the legacy hardware cannot be reduced in line with business needs or market fluctuations, and the opportunity to save energy is lost.

To counter the environmental impact of these legacy systems (and see increases in operational efficiency, effectiveness, scaling and faster time-to-market), those still using physical, on-site hardware need to explore the possibilities provided by cloud storage technologies.

In recent research we conducted on cloud technology and banking institutions, we found that 81% of respondents had adopted cloud technologies to save costs, while 95% cited the increased time-to-market of cloud and 86% said the key benefit was the virtually unlimited scaling opportunity. This trend is complemented across businesses more generally, with 50% of businesses using the cloud to store company data in 2021, an increase of 20% when compared to 2015. 

Migrating from physical storage to a flexible cloud infrastructure also reduces the need to add additional systems as time goes by, thereby promoting a strategy for the long-term improvement of sustainability practices. Google is a great example of a cloud provider that has invested huge sums into making its operations sustainable and has used carbon offsetting to compensate for all of the carbon it has ever created. By 2030 their goal is to run all its servers using 100% carbon-free energy, meaning their customers can tap into Google’s green credentials to support their own sustainability journey. 

Appropriate technical architecture

Excess code is an underestimated but invasive principle of business technology. Often, the technical make-up of websites, machinery or ICT software has unnecessary code that lengthens the processing time and data transmission of an operation. With longer processing times comes more power usage, hindering business efficiency and cost-saving opportunities. 

With an increased focus on inefficient coding and its effect on ICT’s environmental impact, the concept of ‘green coding’ is gaining increased traction. Green coding concentrates on coding efficiency and aims to provide systems and guidelines to ensure a business’ ICT architecture is as efficient as possible, with the ambition being to lower power usage, processing time, and therefore overall energy consumption. The outlook for ICT needs to change – processes should be updated to use the absolute minimum energy required to fulfil their function, before shutting down until required again.

Every small gain that can be achieved in reducing processing energy, will ultimately support a large reduction in carbon footprint.

Energy proportionality

Most IT systems within banks and many other organisations have historically lacked the ability to efficiently manage their energy consumption, or have the ability to react to market fluctuations. The energy used by core ICT systems is therefore often ‘fixed’ and not proportionate to the utilisation of those systems. The concept is known as ‘energy proportionality’, whereby utilisation levels can be measured as a percentage of utilised computing power. While high utilisation is the objective, low utilisation is still the norm and is usually a result of an overestimation of how much software and therefore server capacity is required or will be used. Energy proportionality can also be exacerbated when there are multiple software and ICT operations taking place, or where replicated data centres or resiliency is felt to be required.

 Adopting a combination of cloud technology and green coding can reduce the disparity of projected and actual utilisation. While green coding ensures that the delivery of software applications is as efficient as possible, cloud technology is capable of providing real-time changes to storage and processing capabilities as markets, traffic or software usage changes. This approach has huge benefits for cost-cutting, as migrating to cloud systems usually means you can also adopt a ‘pay-as-you-go’ cost structure for your data processing and storage requirements. Having automated power output based on actual energy expenditure is capable of eradicating overestimations for energy use, thereby saving energy consumption and promoting high utilisation as a result.

Streamlining operations for the future

Advancements in storage technology utilising the cloud, allows many businesses to tap into the efficient, low-energy consuming infrastructure, streamlining their operations and achieving maximum efficiency. Not only will this help firms lower their carbon emissions output by reducing unnecessary power usage, but can also allow them to improve the effectiveness of their systems and processes to save time and costs whilst supporting scaling opportunities and reducing time-to-market. 

Combined with the growing knowledge of green coding principles, the cloud can be used in conjunction with precise technical architecture to provide firms with improved efficiency for their business in both an operational and environmental sense.

All of those within the ICT sector have a responsibility to streamline their emissions output and using these technologies and disciplines is a clear-cut method to fulfil this ambition. 

About the author: Dean Clark is Chief Technology Officer at GFT.

Armed with an investment of up to $150 million, the newly formed team will target growth-stage private companies that create climate solutions related to resource efficiency and climate adaptation for numerous industries. 

Tanya Barnes, who previously led Blackstone Inc’s impact investing platform, has been hired by JPMorgan to jointly manage the new team alongside Osei Van Horne. Horne has served as managing partner of sustainable growth equity investing at the bank since May last year. 

“We believe environmental, social and governance (ESG) factors will increasingly affect the ability of companies to operate and generate returns, today and over the long term. ESG factors also represent opportunities that investors can capture as companies innovate to build a sustainable future,” says JPMorgan Asset Management’s website. 

As the pressure to mitigate the climate crisis intensifies, other major US financial institutions have also been making renewed efforts toward their environmental, social and governance (ESG) related activities. Last week, Blackstone said it launched a platform for investments and lending to renewable energy companies.

The World Economic Forum reports that a significant group of countries has pledged to by 2030, “end poverty, protect the planet and ensure that all people enjoy peace and prosperity.” That sounds like a tall order and admittedly, you have to be a bit of an optimist to imagine that those goals will be reached by that fast-approaching date. But even the more pessimistic (or ‘realist’ if you prefer) of those among us shouldn't throw in the towel. Some huge opportunities on the horizon have more than a little potential to significantly push the planet towards greater eco-sustainability, while at the same time providing more than enough profit for companies and investors – profits, which hopefully will then be further invested into developing ever more ideas and tech to create a virtuous cycle. Investments in biomanufacturing are building upon established bioscience, and startups are pushing all sorts of new low carbon solutions that are often proving to be both viable and cost-effective. These include sustainable manufacturing processes in biochemicals and fuels, biopharmaceuticals, and of course, foods.

The largest sector that may turn out to be a literal cash cow could be all things vegan. The vegan food world is turbocharging. People used to roll their eyes when a product would be described as “vegan meat,” but that's not the case anymore as even top celebrity chefs are reporting that new high-tech iterations of so-called ‘alternative meat’ – some of which is printed with a 3D printer – are game-changers that have so closely imitated the textures and tastes of meat that some may not be able to tell the difference. If a vegan kebab looks, tastes, smells, and even cooks like an ordinary kebab… is it not a kebab? The answer for most people appears to be yes. The list of companies rolling out ‘vegan’ editions of their products grows by the day. Tesla, Polestar, BMW, and Ford, for example, are just a few of numerous carmakers offering ‘vegan’ options. Porsche has a 100% vegan interior option for one model, and the floor of the vehicle is made from recycled fishing nets. Nearly half of the plastic found floating around our oceans is old fishing nets, so the idea is almost a perfect definition of win-win. Porsche also says that the new vegan interior produces 80% less CO2 than a leather version. Aside from luxury cars, there are big developments in vegan lifestyle products such as luxury handbags. Hermès now has a faux leather handbag made out of a type of fungus, while Nike is using ‘pineapple leather’ that's 100% sustainable and provides Filipino pineapple farmers with additional sources of revenue. Vegan, biofriendly, chemical-free cosmetics are also racing forward and promise to become sources of major revenue for both old and new manufacturers.

Many nations around the world are investing heavily in the journey to ‘net zero.’ China, long an example of some of the worst practices in polluting manufacturing, is fast on its way to becoming a leader in the new sustainable economy. Expect some incredible breakthroughs from China over the next five years in energy production and carbon capture as the Middle Kingdom has put in the work and looks set to soon reap the benefits. And yes, it must be acknowledged that it's easier to enact changes in a non-democratic one-party state, but China is at least moving in the right direction. The other big area to look out for is not a new idea and goes back to the idea of microfinancing and credit unions or community development banks with specific missions of serving lower or middle-income communities, and helping lift them out of poverty or the so-called ‘middle-income trap.’ Charging a tiny amount of interest on tiny loans might not sound like a money maker but when scaled, for example, India and China together having perhaps close to a billion people who might sign up – the numbers add up. 

According to the 2020 Report on US Sustainable and Impact Investing Trends, by the Forum for Sustainable and Responsible Investment or US-SIF, “as of year-end 2019, one out of every three dollars under professional management in the United States—$17.1 trillion—was managed according to sustainable investing strategies.” That's impressive but still has much room for growth. As the US-SIF also notes, “A number of studies have found that investors do not have to pay more to align their investments with their values, or to avoid companies with poor environmental, social or governance practices.” Whether jumping on the vegan trend, investing in biotech or putting money into sustainable investment funds, there is capital to be made from making the world a better place, as cliché as that term may be. There's no reason why your dollars can't make you more dollars while also aiding in sustainability and eco goals. 

The wheels of global agreement move slowly – since the first Berlin COP1 in 1995, global CO₂ levels have risen nearly 50%, temperatures are up 0.5 degrees, and the ice on the Greenland cap is melting faster than ever. Around the world, governments are increasingly alert to the reality. The amount of CO₂ in the atmosphere has risen historically faster than ever before, and rising CO₂ levels presage higher temperatures. Even the Saudis get the cause and effect and say they will redirect their economy towards carbon neutrality by 2060.

The problem is large conferences inevitably result in compromise. Compromises beget consequences. Various themes that have emerged from the conference will all impact society and markets in the coming years. These include:

First: the trajectory of carbon pledges and mitigation plans still mean global emissions will continue to rise before tailing off later this century. The experts believe this effectively means political promises to keep temperature rises to a mildly uncomfortable 1.5 degrees look increasingly impossible to keep. The scientists reckon 2.4-2.7 degrees by the end of this century is more likely, and even that depends on everyone sticking to promises.

Second: rising temperatures mean higher costs and more chaotic weather events – like the floods, fires, storms and ultra-high temperatures we’ve seen this year. Mountains are becoming less stable as the ice-binding them literally melts. Increasing climate instability will raise political protests. The consequences will fall heaviest on the poorest nations, meaning the requirement of increasing financial transfers to help them, which leads to.

Third: the problem of how to support and compensate less developed nations has become an urgent matter. Funding to ameliorate climate change and transition from fossil fuels has already fallen well short of what was promised at the Paris COP. While $100 billion is on offer, that’s the same sum India wants as a precondition to action its promised zero-carbon plan for 2070! And, sadly, there is growing suspicion many countries and corporates will try to free-ride CO₂ emission cuts by others, setting up for rising geopolitical tensions.

Fourth: is the critical issue of Energy transition. It sometimes feels like there is an assumption we can just turn every fossil energy source off, and immediately replace them with renewable power – but that’s clearly impossible, unless, of course, you want to switch off the whole global economy.

A well-considered energy transition plan is critical but it’s not simple. Thus far the approach has been to encourage renewables through subsidy and market pressure, primarily the E for Environment in ESG investing – which is becoming increasingly fundamentalist in its application – refusing to countenance any fossil fuel investments.

But market pressure to end investment in fossil fuels and transfer it into renewable is fraught with difficulties. Every investor on the planet now wants to finance and buy renewable power assets, but that means they finance the simple, easy and swiftest returns; like solar and wind power. These are proven and now produced in such numbers the costs of Wind and Solar power have tumbled.

One of the reasons gas prices across Europe have spiked is because the weather in October was calm. As energy demand rose for the autumn, the wind farms came up empty. The reality is wind and solar are easy, but hopelessly inefficient sources of energy compared to more expensive renewable power sources. Hydro and tidal power are far more reliable but currently cost more. That cost will only fall if they see wider adoption.

This leads to the fifth problem – fooling ourselves. The reality is lifetime carbon savings from wind, electric cars, and other “feel-good” solutions are discounted in the effort to be seen doing something. Ultimately, to really cut the carbon load in the economy we probably need a Manhattan Project magnitude effort to innovate new energy-dense technologies in terms of capacitance (batteries) and nuclear power – eventually leading to fusion. Unlimited fusion could solve all our issues – but that’s what we said back in the 1950s after the first hydrogen bombs!

Pragmatists understand a complete restructuring of global energy provision can’t happen overnight. It took 200 years for the world to industrialise and destabilise the climate. With the right political push and incentives, we have the wit and wisdom, and innovative capacity to make it cleaner over the next 30-50 years. We are an inventive species, and we may actually succeed in making things better. Just not overnight.

There is a sixth danger from COVID, and that’s political. Look to the increasing impact of climate protests. COP was never going to be the magic wand climate protestors demand. If the numbers continue to move against neutrality, there are the consequences of green politics to consider.

Being green is no longer eccentric – it’s mainstream. Everyone will answer yes if asked about a better environment. That has moved the goalposts. Increasingly, extreme climate protestors are supporting “De-Growth” strategies – that it’s better to somehow switch off the world to avoid a catastrophic Malthusian disaster caused by too many people consuming too many resources and polluting our closed system spaceship earth. Malthus was wrong in the 18^th century and is no doubt still wrong today!

Being green is no longer eccentric – it’s mainstream.

What COP26 protests and things like Insulate UK highlight is the potential for polarised green politics to collide with the economy and growth. It’s going to take years to wean the economy off fossil fuels, but protestors will demand it happens now! The current volatility of energy pricing demonstrates a massive underlying transition problem and political naivety. We can’t fundamentally change energy provision overnight.

Climate protestors are furious this generation has “stolen” their futures will be even less happy if they succeed in reversing economic growth. The result will be to ensure billions of children as yet unborn don’t just face rising temperatures and sea levels, but also chronic poverty, unemployment, starvation, migration and rising conflict over the environment – water being the primary threat.

The real failure of governments wasn’t ignoring Greta et al and the evidence of global warming, but not anticipating the need for an energy transition plan. In coming years, the noise between climate protests and the slow pace of the transition to clean energy will get louder and become ever more likely to dislocate politics. It sets up a political crisis within the next few years as empowered green campaigners garner more airtime. This has massive market implications.

The initiative, developed by British insurance company Prudential, is being driven by the Asian Development Bank (ADB) which is aiming to have the plan ready for the COP26 climate conference in November this year. The initiative will also involve major banks Citi and HSBC. 

Amid the rising pressures of the climate crisis, the plan aims to tackle the largest man-made source of carbon emissions with public-private partnerships buying coal-fired plants to close them down far sooner than they otherwise would be. ADB’s Vice President for East Asia, Southeast Asia and the Pacific said that 35 years of carbon emissions could be saved through the plan. The ADB aims to prepare for November’s COP26 event by launching a pilot programme in a developing Southeast Asian nation, such as Vietnam, the Philippines, or Indonesia. 

The initiative will also aim to raise the funds for the purchases of the coal-fired power plants at significantly below the normal cost by offering lower than usual returns to investors. However, some aspects of the initiative still need to be finalised, including how the group can convince the owners to sell their power plants, what will be done with the power plants once they have been closed down, and what role carbon credits could potentially play in the plan. 

The initiative comes as major investors and commercial and development banks have come to favour green energy over fossil fuels amid efforts to meet climate targets.  A fifth of the world’s greenhouse gas emissions come from coal-fired electricity generation. The International Energy Agency has predicted that global demand for coal will grow by 4.5%, with 80% of that increase stemming from countries in Asia. 

Back in 2015, a report led by Mercer warned that investors can no longer ignore the impact that the climate crisis will have on their portfolios. Although the report was only published six years ago, the effects of the climate crisis are already being felt more deeply, with record-high UK temperatures in July 2019, unprecedented snow storms in Texas, and the first-ever loss of an Icelandic glacier. It is becoming increasingly difficult to turn a blind eye to these rapid and frightening changes.

The climate crisis is not just an environmental and social concern, but also an economic one. Business operations, government regulations, and individual’s consumption have all already been impacted. Consequently, certain climate factors will ultimately determine which investments succeed and which investments fail. 

However, as with most predictions, it simply isn’t possible to forecast the trends of a changing climate with absolute accuracy. The climate may worsen quicker — or equally more slowly — than expected. Market participants could react in a way that contradicts projections. These examples of climate risk, amongst others, have the potential to shock investment performance. 

What is climate risk?

Climate risk is an investment risk — the probability of occurrence of losses relative to the expected return on any particular investment. Several different scenarios could potentially occur in the future, some favourable, and some not. The same goes for the numerous different scenarios of the climate crisis. Even if investors set reasonable expectations for the future world, there is nonetheless still the potential that the situation plays out differently than anticipated, and this is known as climate risk — the threat that the climate crisis could negatively impact economic growth, inflation, and investment returns. Climate risks are commonly separated into transition risks and physical risks. 

Transition risks

Transition risks can occur as society shifts toward a less polluting and greener economy. As more time passes and the climate worsens, the attitudes of market participants are likely to change, and governments will likely become more open to taxing companies that generate greenhouse gas emissions and subsidizing those that operate sustainably. 

We are already seeing increased consumer demand for greener, more sustainable products and this is a trend that is likely to continue in the coming years. Many firms will adapt their business models to accommodate such demands. These varying outcomes fall on the transition scenario spectrum, creating risk. An example of such might be a company with a large carbon footprint facing the likelihood of future regulatory costs. Another example might be a trend of consumers suddenly shifting toward companies that have committed themselves to more sustainable practices. 

Physical risks

When talking about physical risks, we are referring to the potential for weather and climate to impact asset prices. A key financial concern surrounding the climate crisis is the costs associated with the increasing occurrence of natural disasters and extreme weather events. Such events force potentially unanticipated costs by damaging existing assets, restricting operations, and disrupting existing demand. Some investments are likely to be impacted more heavily than others when it comes to physical risks. Agricultural businesses, for example, are at a high risk of extreme weather-related costs. 

Why climate risk is so difficult to predict 

Uncertainty always makes for a lack of predictability. It is difficult to accurately estimate climate risk because the future is so unknown, even with an abundance of research from scientists. In the grand scheme of things, climate science is still a relatively young field of study and there’s still a lot of uncertainty surrounding the future of the Earth’s natural environments. Even less is understood about how the market could react to an altered climate. Unlike “investment risk”, “investment uncertainty” reflects these unknowns.

Even as climate researchers and scientists amass a greater comprehension of what has created past climate patterns, there’s still a long way to go until more accurate forecasts of physical events can be made. 

It is even more difficult to predict the effects of transition events, as there is very limited data on how market participants might react in varying future climate scenarios. 

Hope for the future of investments

As the years go by, climate science is advancing and becoming increasingly able to comprehend complex climate patterns, and climate economists are working on improving their understanding of the potential impacts of climate on market participant trends. Additionally, academic literature on climate finance and economics is also quickly developing. Several large organisations now exist with the fundamental goal of improving the availability and quality of data. These factors are expected to make the assessment of the climate risk of investments much simpler. Over time, investors should be better able to gauge the exposures their portfolios have to the climate crisis. 

Trump vs. China

Back in 1930, the US introduced the Smoot-Hawley Tariff Act, which raised their already high tariffs, triggering a currency war and, as economists argue, exacerbating the Great Depression. With President Donald Trump’s threat to put 10% tariffs on the remaining $300 billion of Chinese imports that aren’t subject to his existing levies, sending markets tumbling from Asia to Europe, the question on everyone’s lips is: Is history about to repeat itself?

In August, in a bid to hit back against Trump’s administration, Beijing allowed the Chinese yuan to plummet past the symbolically important $7 mark. Economists suggest that this currency manipulation is China’s attempt to display dominance and gain the upper hand in the trade war between the two countries as devaluating its currency could help counteract the effects of US’s long list of tariffs on Chinese goods.

As protectionist actions escalate and US-China relations continue deteriorating, investors and markets have been growing increasingly concerned even though Trump has delayed the imposition of his new tariffs until December. A full-blown trade war wouldn’t be good news to anyone and could seriously weaken the global economy, as the IMF has warned, making the world “poorer and more dangerous place”. Both sides are expected to experience losses in economic welfare, while countries on the sidelines could experience collateral damage. Furthermore, if tariffs remain in place, losses in economic output would be permanent, as distorted price signals would prevent the specialisation that maximises global productivity. The one thing that’s certain, no matter how things pan out, is that there will be no winners in this war.

Economists suggest that this currency manipulation is China’s attempt to display dominance and gain the upper hand in the trade war between the two countries as devaluating its currency could help counteract the effects of US’s long list of tariffs on Chinese goods.

Cyberattacks & data fraud

Millions, if not billions, of people’s data has been affected by numerous data breaches in the past couple of years, whilst cyberattacks on both public and private businesses and institutions are becoming a more and more frequent occurrence. With the deepening integration of digital technologies into every aspect of our lives and the dependency we have on them, cybercrime is one of the greatest threats to every company in the world.

Cyberattacks are rapidly increasing in size, sophistication and cost, as cybercrime and data breaches can trigger extensive losses. In 2016, Cybersecurity Ventures predicted that cybercrime will cost the world $6 trillion annually by 2021, up from $3 trillion in 2015. According to them, ”this represents the greatest transfer of economic wealth in history, risks the incentives for innovation and investment, and will be more profitable than the global trade of all major illegal drugs combined”.

 Emerging Markets crisis

Since the early 1990s, emerging markets have been a key part of investors’ portfolios, as they have been offering strong returns and faster growth. However, global trade tensions, a stronger US dollar and rising interest rates have hit emerging markets hard. Still far from catching up with the developed world, many supposedly emerging markets are developing at a slower pace, which combined with the threat of a global trade war and higher borrowing costs on the rise, has made investors pull in their horns. Emerging markets are the ones feeling the strain and financial panic has been gripping some of the world’s developing economies.

With political instability, external imbalances and poor policymaking which has led to full-blown currency crises in the two nations, Turkey and Argentina have been at the centre of an emerging market sell-off last year. But they are not the only emerging economies faced with a currency crisis – according to the EIU, some economies which are already in the danger zone and could suffer from the same currency volatility include Brazil, Mexico and South Africa.

Still far from catching up with the developed world, many supposedly emerging markets are developing at a slower pace, which combined with the threat of a global trade war and higher borrowing costs on the rise, has made investors pull in their horns.

If the currency crises in Turkey and Argentina continue and develop into banking crises, analysts predict that investors could abandon emerging markets across the globe. “Market sentiment remains fragile, and pressure on emerging markets as a group could re-emerge if market risk appetite deteriorates further than we currently expect”, the EIU explains.

 Climate crisis

In recent months, the media is constantly flooded with reports on the horrifying environmental risks that the climate crisis the Earth is in the midst of poses, but we’re also only starting to come to grips with the potential economic effects that may come with it.

Despite the significant degrees of uncertainty, results of numerous analyses and research vary widely. A US government report from November 2018 raised the prospect that a warmer planet could mean a big hit to GDP. The Stern Review, presented to the British Government in 2006, suggests that this could happen because of climate-related costs such as dealing with increased extreme weather events and stresses to low-lying areas due to sea level rises. These could include the following scenarios:

• Decrease in agricultural areas crop yields due to hotter weather and draught.
• Rebuilding roads that have been destroyed by flooding caused by rising seas and more frequent hurricanes.
• Having to build more efficient power grids because the existing ones are not able to withstand extreme weather conditions.

Due to climate change, low-lying, flood-prone areas are currently at a high risk of becoming uninhabitable, or at least uninsurable. Numerous industries across numerous locations could cease to exist and the map of global agriculture is expected to shift. In an attempt to adapt, people might begin moving to areas which will be affected by a warmer climate in a more favourable way.

A US government report from November 2018 raised the prospect that a warmer planet could mean a big hit to GDP.

All in all, the economic implications of the greatest environmental threat humanity has ever faced range from massive shifts in geography, demographics and technology – with each one affecting the other.

Brexit

Fears that the UK could be on the brink of its first recession in 10 years have been growing after figures showed a 0.2% contraction in the country’s economy between April and June 2019. A weakening global economy and high levels of uncertainty mean the UK’s economic activity was already lagging, but the potential of a no-deal Brexit and the general uncertainty surrounding the UK’s departure from the EU, running down on stock built up before the original 29^th March departure date, falling foreign investment and car plant shutdowns have resulted in its GDP decreasing by 0.2% in Q2. This is the first fall in quarterly GDP the country has seen in six and a half years and as the new deadline (31^st October) approaches, economists are concerned that it could lead to a second successive quarter of negative growth – which is the dictionary definition of recession.

And whilst the implications of Brexit are mainly expected to be felt in the country itself, the whole Brexit process displays the risks that can come from economic and political fragmentation, illustrating what awaits in an increasingly fractured global economy, e.g. less efficient economic interactions, complicated cross-border financial flows and less resilience and agility. As Mohamed El-Erian explains: “in this context, costly self-insurance will come to replace some of the current system’s pooled-insurance mechanisms. And it will be much harder to maintain global norms and standards, let alone pursue international policy harmonisation and coordination”. Additionally, he goes on to note that tax and regulatory arbitrage are likely to become more common, whilst economy policymaking could become a tool for addressing national security concerns.

“Lastly, there will also be a change in how countries seek to structure their economies”, El-Erian continues. “In the past, Britain and other countries prided themselves as “small open economies” that could leverage their domestic advantages through shrewd and efficient links with Europe and the rest of the world. But now, being a large and relatively closed economy might start to seem more attractive. And for countries that do not have that option – such as smaller economies in east Asia – tightly knit regional blocs might provide a serviceable alternative.”