“Ignoring these confronting warnings will simply be negligent”: Australia’s National Climate Risk Assessment sounds the alarm for investors

The Australasian Centre for Corporate Responsibility (ACCR) is commenting on the release today of Australia’s first National Climate Risk Assessment.

While risks to the economy are classed as "moderate" today, they escalate substantially to become "very high" by 2050.

Current impacts include:

• Insured losses from declared insurance catastrophes have grown from 0.2% of GDP (or $AUD2.1 billion) in 1995–2000 to 0.7% of GDP (or $AUD4.5 billion) in 2020–2024.
• In 2024, 15% of household insurance premiums could be priced at more than 4 weeks of gross household income, a 25% increase from 2023.

By 2050, the climate risk evaluation from the Australian government rises to “very high”, with:

• Losses in Australian property values are estimated to increase to $AUD611.0 billion by 2050 and could increase to $AUD770.0 billion by 2090
• Between 700,000 (+3.0°C) and 2.7 million (>+3.0°C) additional days of work are projected to be lost every year by 2061 due to the higher frequency and intensity of heatwaves, particularly affecting agriculture, construction, manufacturing and mining.
• It is estimated that labour productivity could decrease by 0.2% to 0.8% by 2063, which would reduce economic output by between $AUD135 billion and $AUD423 billion.
• Climate-driven events could result in cascading shocks to the financial system. Financial system shocks or volatility can be triggered by asset write-downs or loan defaults across a region, with potential ripple effects for households and businesses by reducing access to finance, the value of investments or superannuation.

Brynn O’Brien, ACCR’s Executive Director, said:

“The National Climate Risk Assessment lays bare a confronting and terrifying reality -- climate risk is here, now, and escalating across every part of our economy and society. It’s clear why the government delayed releasing this report. But delay doesn’t make the risks go away. It only makes them harder and more costly to manage.

“We expect long-term investors – especially investors who have to look out for the interests of their beneficiaries retiring in 30 or 40 years - to be deeply worried. Climate change will erode returns across sectors and geographies. Diversification won’t protect portfolios.

“Mitigation has to come first. Cutting emissions is the only way to reduce the scale of the risk. The most effective way investors can do this is by using their power to accelerate the phaseout of fossil fuels, by pushing companies in their portfolio and advocating with government to secure the right policy settings.”

“Following this Assessment, there can be absolutely no doubt: sanctioning new fossil fuel projects goes against the interests of investors and society.

“Ignoring these confronting warnings will simply be negligent.”

Dr Sophie Lewis, ACCR Chief Scientist, said:

“This Assessment is a stark acknowledgement that financial systems will not be immune from the physical impacts of climate change. Climate change will impact all parts of Australia, with no location spared from severe disruptions.

“Future extreme climate events will significantly differ from what we have experienced before, and will not occur gradually or predictably. Extreme climate hazards will occur in new locations, at new times of the year, for longer durations, at greater intensity and the spatial patterns of extremes will shift. Multiple concurrent or cascading extreme events will be more frequent and there will be a reduction in the time between severe events.

“There will be no business-as-usual in the climate or the financial system. A rapid reduction in greenhouse gas emissions is the only way to reduce our climate risks.”