It’s shocking to say the least that some of us believe climate change is a hoax. Well, climate change is real! The evidence around us is overwhelming and increasing day by day. Over the last 10 to 15 years, we have begun to experience an increased frequency in the occurrence of natural disasters and extreme weather events. In August 2022, Pakistan experienced more than three times its average rainfall. This resulted in flooding with water covering more than 10% of the country, affecting more than 30 million people and 1.7 million homes. The estimated cost of damages as a result of the flooding was at least USD30 billion. In the Southern African region, we faced cyclone Idai in 2019, and we witnessed the devastating widespread effects. Just recently another tropical cyclone, Freddy (the fastest and longest ever recorded) wreaked havoc through Madagascar, Mozambique and Malawi. Authorities are still trying to establish the number of lives lost as well as estimate the cost of damage to property and infrastructure. Furthermore, the uncertain weather patterns being experienced across the globe leave no doubt about the reality of climate change. Heatwaves, wildfires, rivers running dry up.

The Intergovernmental Panel on Climate Change (IPCC) is an intergovernmental body jointly set-up by the World Meteorological Organization and the United Nations Environment Programme. The IPCC has provided policymakers with the most authoritative and objective scientific and technical assessments. Since 1990 IPCC Assessment Reports and other products have become standard works of reference. In 2015, world leaders agreed to limit global warming to a common target of 1.5 degrees beyond which we begin to have some irreversible effects on the global ecosystem. The latest IPCC Assessment Report dated March 2023 issued dire warnings if we don’t take swift climate action.

The current trajectory of greenhouse gas (GHG) emissions is unsustainable. Instead of working on fossil fuel emission reductions, apparently investments in fossil fuels have been on the rise. We’re unarguably accelerating in the opposite direction. Governments had previously committed to reach net zero carbon targets by 2050. Irrespective, at the moment no major country is on schedule to meet this goal. At the same time, the IPCC report has delivered shocking warnings. The report iterates that for us to have any hope of achieving the 1.5-degree limit, fossil fuel emissions have to peak by 2025. It gets scary when you realize that 2025 is just two years away.  Moreover, there is need to cut emissions by at least 50% by 2030 in order to barely scratch the 1.5-degree mark. This puts pressure for ambitious action on the remainder of this decade.

The assessment reports generally project severe consequences for Small Island Nations, Coastal Regions and Sub -Saharan Africa among others. For Sub-Saharan Africa in particular the impacts will be exercabated by our low levels of socioeconomic development and adaptation.  For Africa the predicted impacts on human ecosystems are mind-blowing if we get to 1.5C and these will only get worse as we go beyond the target. Water scarcity, depressed agriculture/crop production, increased frequency and severity of infectious diseases, heat, displacement, damages to infrastructure and to key economic sectors are among the impacts of climate change. Clearly this is an urgent matter that requires maximum attention of policy makers. “This Synthesis Report underscores the urgency of taking more ambitious action and shows that, if we act now, we can still secure a livable sustainable future for all.” “Today’s IPCC report is a how-to guide to defuse the climate time-bomb,” said UN Secretary-General Antonio Guterres.

Given the plethora of problems facing the world such as the collapse of Silicon Valley Bank and the Credit Suisse crisis, which I personally believe are symptoms of systematic fractures. It seems that national governments will increasingly be faced with domestic challenges and pressures. The 2022 World Economic Forum Global Risk Report confirms this. The report predicts that “Short-term domestic pressures will make it harder for governments to focus on long-term national priorities and will limit the attention and political capital that some governments worldwide will be able or willing to allocate to global concerns. Such pressures could also lead to stronger national interest postures, which would worsen fractures in the global economy, potentially coming at the expense of cooperation needed to resolve conflicts and address humanitarian emergencies.”

The same report re-iterates that “Geopolitical and geo-economic tensions will make it more difficult to tackle common global challenges, notably climate change.” The war in Ukraine has reached one year. Over the year we can testify that this crisis has ushered in economic and technological fragmentation. On the other hand, we have a storm brewing between China and the United States over Taiwan. BRICS, an alliance between Brazil, Russia, India, China and South Africa is expanding and at the same time we see various alliances being formed across the globe. Geopolitical dynamics are creating significant headwinds for global cooperation hence increasing the risk of us not meeting set climate targets. Over the years global risk reports have been ranking “Failure to mitigate climate change” as the biggest risk facing the globe in the short to medium term. The latest pronunciations by IPCC are awaking us to the reality that we are likely to hit and go beyond the 1.5 degrees target.

In our mitigation and adaption efforts, it is therefore prudent to assume that we will reach an average increase of 1.5C. Hence better prepare and adjust business models to incorporate climate risk. At the base we look at the projected impacts of a 1.5 degree rise in temperatures and relate each of these to our various business models. For instance, one of the consequences of breaching the target is increased frequency of natural disasters and extreme weather conditions. Bringing this home, you can immediately see how real this gets for us in Zimbabwe especially given our agro-centric economy. We are struggling to be energy sufficient, and this could also easily go south. Crude estimates of our major power sources show that 60% of our electricity comes from Kariba with the remainder coming from Hwange and a few other independent power producers. Please note the thermal power from Hwange is primarily produced from coal, a fossil. That aside, I just want to highlight the risk that is posed by frequent droughts or a prolonged one or more so the damage that can done to the power grid itself by climate change. As highlighted by the tail-end of 2022 and the current power shortages we’re currently experiencing as a country, we are highly susceptible to the effects of climate change. Many questions arise for businesses. Can the business be sustainable with interrupted power supplies? Are there affordable and reliable alternatives to the grid? Can the business afford to pass costs to the consumer without much influence on volumes? For exporters, can you still price competitively, especially given the operationalization of the African Continental Free Trade Area (AfCFTA)?

It’s not all doom and gloom, in the midst of challenges there lies opportunities as well. Business will have to look at climate change from a risk mitigation perspective as well as an opportunity seeking angle. Professionals, policymakers, activists, entrepreneurs across the globe are all on this. Personally, representing the actuarial profession, we’re in this too. Inherently we’re problem solvers and here we have a challenge to ensure sustainable future for generations to come. Insurers have been identified as long-term partners in climate action and ensuring a sustainable future.

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