Climate change poses risks to the economy and financial market. This is reported in the article The Bank of Russia.
Climate change is accompanied by increased heat, more frequent floods and droughts, and damages human health, infrastructure, and agriculture. All this inevitably creates risks for financial stability.
According to various estimates, Russia can potentially benefit from climate change, provided that preventive measures are taken, but it may also face damage of 1-2% of GDP annually, which will be most noticeable in certain regions and industries. Therefore, it is important to develop risk assessment tools, monitoring and disclosure of information about physical climate risks, improve stress testing and improve data quality, the regulator notes.
The cumulative damage from physical climate risks on the horizon of 2050 and 2100 may reach a significant share of GDP, especially in low-income countries or in countries of the tropical climate zone, the document says.
GDP remains the basic indicator for expressing the damage caused by climate change. However, when modeling the damage caused by climate change, economists go beyond GDP, trying to translate losses, including non-economic ones, into monetary terms. For this reason, in practice, there may be confusion between GDP itself as an indicator that includes only market transactions, and methods for assessing climate damage, which sometimes use GDP as a basis, but supplement it with non-economic components through special models.
