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Sustainability Insights Research: Lost GDP: Potential Impacts Of Physical Climate Risks

By 2050, if global warming does not stay well below 2 degrees Celsius, up to 4.4% of the world's GDP could be lost annually, absent adaptation. This will test countries' adaptation plans, particularly those of lower-income nations that are disproportionately exposed and less able to prevent permanent losses. The rising likelihood of compound climate events adds to the challenges of climate analytics. Understanding these non-linear dynamics appears crucial to assessing specific risks each country faces and may help policymakers pursue more-targeted policies. The adaptation gap is widening, given slow progress on preparedness, and financing conditions are tightening. Financing rising adaptation costs as the impacts of climate hazards worsen may become more difficult in an environment of higher interest rates, adding another hurdle to developing countries' adaptation implementation.


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