15 years of risk: from economic collapse to planetary devastation

The global risk landscape seems to be changing faster than our ability to manage it.

When the World Economic Forum first launched the Global Risks Perception Survey (GRPS) in 2006, economic risks filled most of the top spots by likelihood and impact.

Fifteen years and a Great Recession later, the world economy is again facing serious obstacles – inequality, protectionism and slowdown – yet economic risks have moved away from the survey’s spotlight.

In this year’s Global Risks Report – the 15th edition – all five of the top risks by likelihood, and three by impact are climate-related. Never before has one issue dominated the survey in this way, not even through the 2008 – 2009 financial crisis, when economic concerns occupied at most three out of the five top spots by likelihood, and four by impact.

What can explain this marked shift in risk perception – from economic to climate – even though many economic risks remain?

Examining the shift in risk perceptions

Four trends can explain why risk perceptions have shifted so drastically:

1) Climate change is a priority for youth

The world’s young people are tremendously concerned about the fate of the planet. Ninety percent of respondents to the GRPS from the Forum’s Global Shapers Community – younger community leaders – believe that “extreme heat”, “destruction of ecosystems” and “health impacted by pollution” will worsen in 2020. They also rate the impact of these events as extreme and imminent.

Young people have made their voices heard across the world, not only using social media, but using their feet and their ballot papers. Last year, millions of schoolchildren participated in climate strikes worldwide, young Europeans were decisive in the Greens’ parliamentary election success, and recent polling suggests environmental policy will be pivotal for young Americans in the 2020 elections. This generation’s activism has likely influenced global risk perceptions.

2) Exposure to better information

More accurate climate-change data has been released in recent years. The IPBES Global Assessment Report on Biodiversity and Ecosystem Services, a landmark assessment of the state of the planet, was released in May 2019. Similarly, the Met Office Hadley Centre’s HadSST4 dataset, the most widely used source of sea surface temperature data, was updated just last year to show that oceans have warmed more than previously estimated. Both warned of a much more dire future for the planet – and a shorter timeframe to avert it.

3) Direct contact with climate change

Extreme weather events have hit every continent and the frequency of natural disasters has increased to one per week. Over the past few years, Belgium, France, Germany, Luxembourg, the Netherlands and the United Kingdom have seen record-breaking heatwaves; fierce wildfires have blazed through Australia, Canada, Chile, Spain and the US; while Bangladesh, India, Thailand and Sri Lanka have registered severe and longer droughts. As a result, more people are feeling the impacts of climate change, many of whom are in regions of the world that were previously unaffected.

4) Internalization of economic stagnation

Years of overcoming economic hardship may have led respondents to believe that economic risks can be weathered in a way that climate change cannot. After all, the 2010s were the slowest post-crisis period in terms of growth since the 1970s – the world economy has been stuck at approximately 3% growth since the Great Recession.

Moreover, newer generations may no longer see a precarious economy as a risk, but simply as a reality. For example, Americans born between 1980 and 1989 are 34% less well off than earlier generations, 67% of young Latin Americans have experienced financial instability, and those in their 30s in the United Kingdom are “the first post-war cohort not to at least start working-age life with higher incomes than their predecessors”.

The environmental wager

It is no doubt welcome news that stakeholders are worried about the fate of the planet. It means there is increased awareness of the grave threats of environmental degradation; which hopefully will translate into more ambitious climate action.

However, the drastic and relatively quick shift in risk perceptions – from economic to environmental in the GRPS – is potentially troubling. Because environmental and economic risks are inextricably linked, risk perceptions that account for only one over the other mean blind spots may be arising and integrated mitigation efforts may be lacking.

The stable – albeit sluggish – economy of the past decade has incentivized the development of green practices, but years of progress could be offset by a tougher economic context. The global economy is showing signs of a slowdown that could last for many years, and if stakeholders view economic and environmental risks as distinct, there is a higher likelihood that short-termism will take hold as creating opportunities for economic advancement becomes more pressing.

In the near future, immediate economic and political concerns could arise, but they should not fully displace ongoing environmental risks from our perceptions.