The Alarming Global Risks Report

In January, the World Economic Forum published its Global Risks Report. And it's...h-hm...alarming.

As shown in this image, the greatest and most likely risks are environmental. Weapons of mass destruction are no longer the greatest risks to our global economy and general well-being. And environmental catastrophes are getting more and more expensive.

Environmental disasters—which are becoming more intense and more frequent—caused $165B in estimated losses in 2018. The previous 10-year annual average was $71B. 2017 was actually the costliest year on record for natural disasters, with $344 billion in global economic losses.

So...what can we make of all this? And what the heck does any of this have to do with Real Estate Notes?

Risks to our global economy should be on everyone's radar, whether you're a Note investor or a 401(k) manager or a shoelace manufacturer. So here are three takeaways:

1. Many institutional investors are considering fossil fuel divestments. If the world sticks to its 2°C global warming threshold (Paris Agreement), lots of oil, gas, and coal reserves will likely need to be left untouched—leaving them “stranded”, forfeiting roughly $1-4T from the world economy. Heavy investments in this sector may create unwelcome portfolio exposures.

2. Hunker down. In a recent survey, actuaries ranked climate change as their top risk for 2019, ahead of damages from cyberattacks, financial instability, and terrorism. Insured losses actually dropped in 2019 but more frequent forest fires, bushfires, and hailstorms are causing long-term environmental concerns.

3. We got the wheel. The Global Risks Report makes it clear we have a lot to do to mitigate risks. The good news: we're in control of how we respond, as investors and industry leaders.

Source: visualcapitalist.com