The report is timed to coincide with World Meteorological Day, which is celebrated annually on March 23.
The essence of the phenomenon is simple but invisible to the general public: the Earth receives much more energy from the Sun than it gives out into space, which accelerates the heating of the oceans and atmosphere, writes The Guardian. Most of this heat accumulates under the surface of the seas – more than 90% – intensifying extreme weather events.
How this affects the economy
Such a fundamental climate shift is beginning to rewrite economic logic, the publication emphasizes. And it’s affecting a wide variety of sectors and markets. These changes are not always visible, but investors are already starting to take them into account in their long-term strategies.
The most obvious “victims” of the planet’s overheating are agriculture and the food sector. More frequent droughts and extreme heat are reducing crop yields, driving up food prices and increasing inflation risks in emerging markets. Climate change is already affecting costs in the agribusiness and energy sectors.
The energy sector is also suffering – rising water temperatures affect the efficiency of thermal and hydropower plants, reducing their output and increasing operating costs.
Unexpectedly, financial markets are also in the mix, but everything is logical. Investors and insurers are beginning to recognize climate threats as a new asset risk class. Losses from extreme events and future losses could reallocate capital from resilient but climate-vulnerable sectors to more adaptive ones. A number of analysts estimate that climate risks are already reflected in the valuations of insurance products and the value of assets with high climate exposure.
Moreover, global financial institutions and investors are looking at this phenomenon as a long-term driver of commodity prices, insurance premiums, cost of capital and portfolio diversification.
Although markets are not yet directly rattled, signs that climate uncertainty is beginning to be reflected in risk assessments are already evident in analyst reports and the insurance sector, the WMO report states.
Why it matters today
WMO’s publication on this very day emphasizes: energy imbalance is not an abstract problem of the future, but a current economic and financial threat. It is exacerbating extreme weather risks, adding to pressure on energy and agriculture, and will be increasingly reflected in macroeconomic indicators as heat builds up.
Economists warn: if these fundamental changes are not taken into account, the resilience of markets – from food to energy – will be at risk of more rapid and painful adjustments than many now anticipate.
