A More Unstable World
How climate change will drive geopolitical risk and how companies can prepare
In May Intelligent Risk, a publication of the Professional Risk Managers' International Association (PRMIA) published my article (reproduced below) on Climate Change and Geopolitics
2022 was the year climate risks could no longer be ignored. A series of extreme weather events put climate in the spotlight of world news. Major rivers including the Rhine, Po, and Yangtze fell to record lows. Heatwaves in China forced many factories to close over the summer. Pakistan suffered devastating, once-in-a-century flooding and extreme heatwaves.
Climate change will make extreme weather such as this more frequent and deadly. Floods can cause great human suffering, destroying homes and businesses and encouraging the spread of water-borne disease like cholera. In Pakistan’s case, flooding also dealt a deadly blow to an already fragile economy.
The chaos and disruption of flooding means lower economic growth, higher debt payments and a massive bill for reconstruction. The ripple effect of climate change goes well beyond the headlines of new extremes of weather. The impacts will spill over into politics, economics and society, radically reshaping the world. Climate change acts a force multiplier, accelerating existing threats (extreme weather, flooding and drought have always been with us) to make them more common and deadly.
Conflict and Climate
Climate change-induced drought and desertification in the Sahel region of Africa have driven the rise of extremist and militant groups in the area. Climate change and increasing demand has seen water sources dry up across this already water-stressed region as well. This has driven many farmers and pastoralists from the land. As traditional livelihoods disappear, desperation pushes locals into the arms of extremist groups such as Boko Haram and Daesh. The rise of these groups has sparked a number of conflicts across the Sahel, pitching government forces against these extremists.
A hotter world is a more unstable and dangerous world. A world facing more hunger, drought and conflict will experience more geopolitical turmoil as countries grapple over dwindling resources. The construction of the Grand Renaissance dam in Ethiopia has sparked anger in Egypt because it threatens the flow of water on which the country is highly dependent. If the Nile shrinks further as expected due to climate change and growing demand for its water, Egyptian agriculture will become increasingly unviable.
Climate risk will comprise a series of shocks that will overlap and overwhelm governments. As temperatures rise, the likelihood of mass crop failures across the globe will increase. Already, many of the world’s breadbaskets are under pressure from record-breaking heat and water shortages. The Indus and Ganges River basins in South Asia face the competing burdens of increasing demand, extreme disruptive weather, and rising temperatures—all factors that threaten India’s ability to feed its people.
A mass crop failure of one or more key regions such as the Ganges, Euphrates or Nile basins would impact millions of people, creating famine and potentially engulfing the world in economic and political chaos. Widespread crop failure along with extreme heatwaves would likely see mass migration that could see the movement of millions of starving and desperate people attempting to cross borders.
The movement of Syrian refugees into Europe caused a major political crisis as countries such as Turkey and Greece grappled with millions flocking to their borders. The Syrian war that started the refugee crisis has been linked to climate change by academics. A long-running drought pushed many poor and hungry farmers into cities, which created an angry, politically volatile movement of people eager to protest at the government.
Policy makers and scientist are careful not to attribute an event solely to climate change. However, it will make events like the Syrian drought and subsequent war more common and frequent.
One or more major crop failures would trigger higher global food prices. In turn, this would put major pressure on economies across the world and unleash unpredictable political reactions. Governments may turn to isolationist policies such as export controls on food in an attempt to protect their own populace. Nations could lurch toward extreme politics or lash out at neighbours in an attempt to seize resources such as supplies of water.
The COVID-19 Pandemic was in many ways a foretaste of the future. The virus itself was a major killer, but the second and third impacts were also enormous. Think of the unpredictable economic disruption and societal change – all factors that are still unfolding. In late 2022, the Chinese government shifted from strict lockdowns to relaxing COVID restrictions in a matter of weeks, causing confusion and disruption in and outside China.
How Can Companies Prepare?
Companies need to prepare for a more unstable world. One leader in this regard has been the United States military, which recognises climate change as a “destabilizing and potentially catastrophic transboundary challenge,” and has prepared detailed scenarios to prepare for a wide range of unfolding threats.
Other organisations should follow this example and create credible climate-related scenarios that hypothetically could impact their own operations. This might include deep and disruptive economic shocks and loss of markets in badly afflicted regions, supply chain interruptions and widespread political uncertainty.
Organisations should develop simulations and exercises that allow them to understand how these scenarios will affect their strategies and how they should respond. Successful firms of the future will not only have a plan for climate change, they will be well positioned to thrive in these adverse circumstances.
While the picture painted around climate change is often bleak, there are causes for optimism. The pressures of this new world could spark a powerful reaction as countries extend and develop innovative technologies to mitigate, or even reverse, the damage of climate change. Think of how quickly vaccines were developed for COVID-19. The same pressures could even see the world pull together politically to develop successful policies and initiatives to combat this existential threat.
Climate change is now firmly in the seat as a driver of geopolitical risk, a trend that will intensify with each major climate related disaster. Businesses should be preparing by understanding and monitoring how climate should be preparing by understanding and monitoring how climate related risks will disrupt an already volatile world, and what that means for their own strategy and operations.