NRI Annual Review 2024 - Flipbook - Page 7
By Amy Barnes,
Head of Climate and
Sustainability Strategy,
Marsh
Around the world, the
energy transition is
gaining momentum. Over
two-thirds of the global
economy is now covered
by a net-zero target,
and in 2023 the world’s
renewable energy capacity
additions went up by
nearly 50%. Meanwhile,
according to the IEA
nuclear power accounts
for around 10% of
electricity globally,
and for almost 20% in
developed economies.
The success of the energy
transition depends on the
rapid scaling of breakthrough
technologies, such as carbon
capture, hydrogen, SMRs and
nuclear fusion. But new and
emerging global risks present
potential barriers to progress.
How the insurance industry
responds will be vital to tech
development and decarbonisation
in the years ahead.
According to the World Economic
Forum’s Global Risks Report
2024, the global risk landscape
is currently shaped by a “duo
of dangerous crises: climate
and con昀氀ict”. There are of
course a multitude of risks and
uncertainties facing the world
today. Misinformation and
distrust, in昀氀ationary pressures,
social polarisation and the
negative impacts of AI, to name
a few. But, in the long term, it
is climate change and naturebased risks, compounded by
geopolitical tensions, that
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loom largest for governments,
industries and economies.
Climate risks have been growing
in frequency and severity in
recent years. Analysis from Marsh
McLennan shows that the number
of 昀氀ood disasters worldwide
has increased by 181% since
the 1980s. In 2023, wild昀椀res
burned 20 million acres across
Canada – 21 times above the
previous decadal average. In fact,
around the world 2023 broke
multiple records for extreme heat,
wild昀椀res, storms and 昀氀ooding,
resulting in widespread damage
and loss of life. Ominously, it was
also the 昀椀rst year in which the
1.50C threshold was breached for
an entire 12-month period.
These events naturally shape
risk perception and predictions.
As the Global Risks Report 2024
explains, extreme weather events
are perceived by leading experts
to be the second-most severe
risk we will face over the next
two years. Five of the top ten
projected risks over the next ten
years are also linked to climate
and the environment. Even
when other risks are identi昀椀ed,
climate is ever-present. This was
the case at Davos in January,
where it seemed that in every
session and in every discussion
– whether on AI, mental health
or migration – climate was
cited as a contributing force or
exacerbating factor. In global
risk analysis and discourse today,
climate is a constant.
Climate, con昀氀ict
and the energy
transition
Increased climate risks pose
a major threat to the energy
transition. As we know, extreme
weather can cause severe
damage to existing energy assets,
According to the
World Economic
Forum’s Global
Risks Report
2024, the global
risk landscape is
currently shaped
by a “duo of
dangerous crises:
climate and
conflict
affecting energy production,
transmission and delivery. These
risks in turn affect investor
con昀椀dence, which hinders the
scaling and deployment of the
new technology needed in the
drive to net zero. Even with
relatively mature technology,
such as wind turbines, exposure
to extreme weather and natural
catastrophe risk threatens access
to 昀椀nance and can undermine
project economics.
Climate change also disrupts
supply chains. Both drought
and rising sea levels can impact
trade routes and transport
infrastructure, which restricts
the movement of materials and
components required by clean
tech industries. And then there is
the growing problem of natural
resource scarcity. Taiwan, a major
producer of semiconductors, is
currently facing chronic water
shortages. Chipmaking consumes
huge volumes of water, and with
local river basins and reservoirs
depleted by drought, some
manufacturers now depend
on water trucks to sustain
semiconductor production.
