Chronic. As in previous years, the summer of 2023 will have been marked by major natural disasters, many of which are linked to climate change. Admittedly, this is not a new phenomenon, but according to data collected by the reinsurer Swiss Re, damages have tripled between 1980 and today, to reach in 2022 approximately 275 billion dollars (255 billion euros) worldwide, equivalent to the annual gross domestic product (GDP) of a country like Finland.
The physical and human consequences are no longer just local; they now represent a macroeconomic issue at the global level. Risks are becoming more and more systemic in a globalized economy. We understand why central banks have taken up the subject: there are threats to price dynamics but also to financial stability.
It is in this context that the Banque de France organized a seminar in Paris on 27 June on the subject Climate change, natural disasters, and financial risk: How could central banks integrate environmental issues into their policies? (“Climate change, natural disasters and financial risk: how could central banks integrate environmental issues into their policy?”), bringing together economists, central bankers and French, German and Japanese insurers.
Financial but also productive risks
Although the phenomenon is global, not all regions are affected in the same way. Asia is particularly affected, as shown by the Japanese economist Yasuyuki Sawada: according to the Asian Development Bank, more than a third of natural disasters in the world since the 1960s have taken place on this continent. Countries such as the Philippines, India and Indonesia today combine the highest risks.
The first issue is that of measuring the impact of these natural disasters. From this point of view, economists are not always well equipped since the traditional measures of GDP tend to make destruction a creative factor of growth, linked to reconstruction.
The risks themselves are diverse and linked to the dynamism of the economy: financial, but also productive, which does not work in favor of Asia, central for global value chains: the risk is increasingly high when whole sections of production in a given sector are affected following a local climatic event.
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