Water-Related Risks to Cause US$ 5.6 Trillion in losses by 2050

5 Oct 2022 by The Water Diplomat

GHD, a global professional (engineering and architecture) services company specialising in water, energy and urbanisation, has released a study in September claiming that, by 2050, droughts, floods and storms can have a negative impact on 8 key countries’ GDP of up to US$ 5.6 trillion. Noting the rise in global economic losses from extreme weather from US $ 117,8 billion in 2020 to US $ 224 billion in 2021, GHD conducted water risk analysis across seven countries to estimate future losses in these countries by 2050. The study, entitled “Aquanomics: The economics of water risk and future resilience”, found that the manufacturing and distribution sector would be the worst affected, with projected losses of US$ 5.2 trillion. 

The researchers first estimated direct losses based on data from the insurance sector. Secondly, a literature review was conducted on the sectoral economic impacts from extreme weather on different sectors in the selected countries such as agriculture, banking and insurance, energy and utilities and manufacturing and distribution. Finally, this data was inserted into an economic model to predict the broader impact of these losses to the economy. The impact assessment focused on the United States, China, Australia, UK, Philippines, Canada and the United Arab Emirates. In the U.S. alone, the report estimates, losses could be in the region of US$ 3.7 trillion and in China, despite the country’s heavy investment in water infrastructure, they could be as much as US$ 1.1 trillion. 

While China’s investments may be preparing the country to minimise the loss of lives, more could be done to build resilience in the economy, with measures such as generalising the use of recycled water in the industry, the study finds.

In the UK, for instance, its long coastline and ageing infrastructure makes the country more vulnerable to the impacts of water-related phenomena and the rehabilitation and replacement of water infrastructure could help minimise negative impacts.

Despite the diversity of situations countries are in, which would require bespoke measures for each, the report points out three main areas of intervention to help mitigate these effects. The first key aspect is “adaptation”, companies’ ability to adjust to an uncertain future by making short- and medium-term investments and adjusting their structures to better deal with change. The second is “optimisation”: putting technology and data-driven insights at the service of improving resilience and performance. Lastly, through the notion of “prioritisation of regeneration”, GHD advises companies to adopt nature-based solutions, recycling and transitioning to a circular economy.