Last month, we mentioned that global warming is raising the cost of capital in those countries most affected by climate change. It’s also hitting their prospects for economic growth through ripple effects, such as lower productivity during periods of extreme heat. Any assessment of climate change for investment purposes can only be undertaken in the most granular possible manner, but from a top-down perspective, two things matter: (1) “Supercharged” weather events will accelerate and start affecting ROI in the next five years, not 15 or 20 years from now; (2) Some regions, such as Southeast Asia, the Middle East, West Africa and the North China Plain, will suffer disproportionately while others will benefit—in particular, for the 10 lowest-risk countries that happen to be largely in Europe.
Climate change and rising temperatures have an impact on wellbeing by exercising a negative impact on our mental health. A recent meta-analysis covering 60 prior studies concluded that rising temperatures and climate instability are correlated with human conflict: “Deviation from normal precipitation and mild temperatures systematically increase the risk of conflict, often substantially.”
A plethora of observational studies conducted in countries as different as the US, the Netherlands or Tanzania come to the same conclusion, showing that more heat leads to higher rates of suicide, domestic violence and road rage. Correlation is not causation, but this is intriguing and suggests that the research is onto something. It would come as no surprise that apart from the net economic damage that climate change currently inflicts, it also has a negative impact on wellbeing—both mental and physical.