There is an interesting graph in the awesomely-named UNEP report 'Demystifying Materiality', which plots the likelihood of global risks against their severity (expressed in US Dollars, rather than lives lost or misery caused. Perhaps dollar losses are now an acceptable proxy for misery?). I think they are attempting to portray biodiversity and ecosystem risks as being 'material' risks that can impact a business where it hurts, and are thus not to be considered abstract externalities (and thus 'immaterial').
The graph is reproduced below (source: World Economic Forum), and a couple of things stand out:
- Since the severity and likelihood of biodiverity loss has been upgraded, the mildest risk on this graph is 'International Terrorism', which is not particularly likely (5%) and not particularly expensive (30 billion Dollars or so). Yet I imagine of all the things on this graph, this is the one that has the most money spent on it. Stiglitz in The Washington Post estimates that total cost of the Iraq war to the US (so costs to UK and other countries need to be added to this) as three trillion dollars. Crudely, the cost of mitigation outweighs the severity of the threat by a factor of 100. Not very efficient.
- The risk of a slowing Chinese economy, defined as growing at less than 6%, is the most likely and apparently more expensive than coastal flooding. Yet it is inevitable that the Chinese economy must slow down at some point. And the faster it grows, one could argue that is increases some of the other risks on this chart.
- Conversely, the most expensive risk - oil price spikes - is the one most likely to reduce many of the other risks on the chart, by increasing fossil fuel prices and driving investment in renewable energy, and thus reducing emissions.
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