Covid-19 scars raise societal and climate risks: WEF

Growing inequality and political tensions in the wake of the pandemic will make it even harder to tackle climate change, ranked as the world’s biggest risk, according to the World Economic Forum (WEF) Global Risks Report 2022.

The annual WEF report paints a pessimistic picture. The vast majority (84%) of respondents were more worried or concerned about the world going into 2022, while only 4% were more optimistic. The key theme to emerge from this year’s WEF report is growing concern for climate change, a risk that will require a global solution and collaboration. Yet the world that is emerging from the pandemic is one riven with geopolitical tensions and growing social and economic inequalities.

Just under half (42%) of those surveyed by the WEF expect that the world during the next three years will be “consistently volatile with multiple surprises”, while 37% warned of “fractured trajectories separating relative winners and losers”. Only one in ten believe the global recovery will accelerate.

Climate change and societal risks dominate this year’s ranking of global risks. Environmental risks, in particular, have risen up the ranking in recent years, and now dominate the mid- and long-term outlook.

In the immediate term – the next one to two years – extreme weather was seen as the biggest threat, followed by livelihood crises, climate action failure, social cohesion erosion, and infectious diseases. For the two- to five-year time horizon, climate action failures and extreme weather were the top two risks, followed by social cohesion erosion, livelihood crises and debt crises.

However, when looking ten years ahead, environmental risks occupied all of the top five places. Climate action failure led the ranking of the most critical risks on a global scale during the next ten years, followed by extreme weather, biodiversity loss, natural resource crises and human environmental damage.

“While respondents’ concern about environmental degradation predates the pandemic, increasing concern with climate action failure reveals respondents’ lack of faith in the world’s ability to contain climate change, not least because of the societal fractures and economic risks that have deepened,” the WEF says in the report.

The WEF notes that risks linked to the transition to a net-zero future are getting more attention: “A disorderly transition would exacerbate these risks, impacting the ability for organisations to conduct business, causing economic volatility and destabilising the financial system.”

According to the report, the pandemic is leaving economic and social scars. Social cohesion erosion, livelihood crises and mental health deterioration were three of the top five risks that deteriorated the most globally through the crisis. “This societal scarring compounds the challenges of effective national policymaking and reduces the attention and focus needed on international cooperation for global challenges,” it states.

Climate risks were also exacerbated by Covid-19. Climate action failure and extreme weather were among the top five risks cited as having increased during the pandemic. The risks of a debt crisis and cybersecurity failures were also perceived as having increased since the start of the pandemic.

According to the WEF, the uneven recovery from the pandemic risks compounding pre-existing social cleavages and geopolitical tensions. “A divergent economic recovery from the crisis created by the pandemic risks deepening global divisions at a time when societies and the international community urgently need to collaborate to check Covid-19, heal its scars and address compounding global risks,” it says.

Respondents to the WEF survey believe “geo-economic confrontations” will emerge as a critical threat to the world in the medium to long term and as one of the most potentially severe risks during the next decade. “While pressing domestic challenges require immediate attention, the pandemic and its economic consequences have proven once again that global risks do not respect political frontiers. Humanity faces the shared and compounding threats of economic fragmentation and planetary degradation, which will require a coordinated global response,” WEF states in the report.

Speaking at the report launch, Carolina Klint, managing director of Marsh, said the survey findings presented a “sobering overview” and show the need for countries and companies to build resilience and work together in public-private partnerships. She warned that the pandemic had been a “distraction” from the risk of climate change, which is already evident in its effect on critical infrastructure, agriculture and populations.

The report also highlights the growing risks of growing digital inequality. During the pandemic, many countries and companies underwent a “digital leap” and were able to quickly access and seamlessly adapt to new forms of human interaction and remote work. However, this digital leap has increased cybersecurity vulnerability and threatens to increase social and economic inequality, as three billion people in the world remain offline, the WEF says.

“Respondents believe cybersecurity failure will continue to test the world’s digital systems over the next two years and, to a lesser extent, in three to five years. No technological risk appears among the most potentially severe for the next decade. This suggests lower relevance to respondents – or a blindspot in perceptions given the potential damage of cyber-risks – compared to economic, societal and environmental concerns.”