Launched on January 17 at Bloomberg's London headquarters, the World Economic Forum’s (WEF's) 2018 Global Risks Report stated that environmental risks are predominant, the global economic recovery has underlying problems, and geopolitical and cyber risks are rising. These threats provide both dangers and opportunities for foreign investment, it added.
According to the report, environmental risks are growing year on year, while extreme weather events and natural disasters are primary risks to humanity in 2018. Indeed, the report found that 2017 witnessed one of the worst hurricane months on record, the first rise in carbon dioxide emissions for four years, and extreme temperatures. The report added that biodiversity is perishing at mass extinction rates, agricultural systems are strained, and pollution is becoming ever more lethal, accounting for roughly one in 10 deaths worldwide.
On a brighter note, Alison Martin, group chief risk officer at Zurich Insurance Group and a panelist at the launch, said that renewable energy will be cheaper than fossil fuels in a few years. Ms Martin told fDi that the risks and difficulties in transitioning to renewable energy are “likely to impact global [investor] confidence far more than catastrophic physical risks [such as natural disasters]”. However, “there are great renewable energy [FDI] opportunities in China and India, who are leading the pack…[Everyone else] will be forced to rapidly catch up,” she added.
In 2017, geopolitical risks worsened with the increase in populist politicians coming to power and the deterioration of multilateral rules-based approaches, according to the report, which concluded that the risk of political or economic confrontation between major powers is significantly more likely in 2018. Richard Samans, a member of the managing board the WEF, said that geopolitical risk is the greatest threat to investor confidence.
On FDI, Mr Samans said that foreign investors are becoming more concerned with the non-financial, social impact of their business. To help investors achieve this, the WEF is working on a platform that “provides a marrying up of cross border input, output data that shows the path of supply chains [alongside] measures of sustainability performance, both social and environmental”, according to Mr Samans.
Similarly, at the WEF's annual meeting at Davos in late January, the WEF will be releasing its Inclusive Development Index, which, unlike a GDP index, measures living standards and the spread of wealth. Although global economic recovery is under way, in terms of GDP, inequality, debt and wage gaps are widening.
Cybersecurity risks are also worsening, according to the report. In five years, attacks against businesses have doubled worldwide. Unlike natural disasters, “we’re not prepared for cyber attacks” despite them causing billions of damage each year, said panelist John Drzik, president at Marsh Global Risk and Digital.