Climate risk could cost up to 6% of Italian GDP by 2050. This is the conclusion of the research conducted by Deloitte on the country’s competitiveness and the direct damage caused by climate change. In fact, due to the intensity of the events, the economic impact could reach almost 5 billion euros per year by 2050.
At the moment, medium and small Italian businesses are not ready to face the effects of climate change and its economic impact. The survey shows that only 14% of SMEs have adopted measures for business continuity in the event of extreme events and only 10% have introduced adaptation actions. One of the most exposed sectors is tourism, with direct damage to infrastructure that could reach around 2 billion euros by 2030.
The risks of climate change on SMEs
Deloitte, a consultancy and auditing services company, has produced a report together with experts from the Polytechnic of Milan, Ca’ Foscari University and with Ipsos-Doxa on the climate risk for Italian GDP. The result of the study is a snapshot that shows the signs of suffering for SMEs due to the direct impacts on Italian infrastructure caused by climate change.
These damages have been estimated at 5 billion euros, while the impact on GDP (considered “indirect”) is a progressive reduction in GDP, between 1.6% and 6% by 2050.
Paolo D’Aprile, Sustainability Leader of Deloitte Central Mediterranean, explained how Italy, due to its geographical location in the Mediterranean, is among the European countries in which the effects of climate change manifest themselves most rapidly.
He then underlined how:
Climate change already produces significant economic losses today which will amplify in the future. In this scenario, investing in mitigation and adaptation strategies does not only mean responding to regulatory or financial constraints, but also seizing a concrete opportunity to strengthen the growth and innovation capacity of businesses and territories.
The impact on infrastructure
The ones who will be especially affected will be SMEs, those who are not yet equipping themselves with security systems and those who, by sector, are the most exposed. To date, among Italian SMEs only 14% have adopted measures for operational continuity in the event of extreme events and only 10% have introduced adaptation actions aimed at infrastructures and physical assets.
A figure which, when placed alongside the damage to the sectors most at risk, is worrying. In fact, the annual direct damage to Italian infrastructure caused by the impacts of climate risk could reach around 2 billion euros by 2030 and 5 billion by 2050.
If indirect effects are added to these, such as the interruption of services and impacts on supply chains, the overall estimated cost is between 11.5 and 18 billion per year in 2050. And the tourism sector risks seeing a contraction in demand of up to 8.9% in the event of a sharp increase in average temperature (+4°C), and direct losses of around 52 billion euros.
The effects on GDP
In this scenario the consequences on GDP are inevitable. The report predicts a progressive reduction in GDP of between 1.6% and 6% by 2050.
The analysis shows that the economic damage:
it tends to accumulate in a non-linear manner and accelerate progressively over time.
And also that climate risk is transmitted from the country’s real economy to the financial one in different ways, such as the cost of refinancing, the increase in public debt and the compression of fiscal space.
Elio Santoro, General Manager of Deloitte Climate & Sustainability, asks SMEs to take “a leap forward”, between insurance coverage and investments to mitigate physical climate risk.
