EDITORIAL | «Disaster» rather than «crisis».
« Disaster » rather than « crisis ». To insist, as many scientists do, on the semantic classification of the Covid episode is far from trivial. There is of course a major financial stake, especially for insurers, for whom the qualification of the crisis as a « health catastrophe » or « natural » one, opens obligations to compensate for the operating losses of companies. But such a classification sheds light on a fundamental element of the ordeal we are going through: the nature of risks. It is impossible to consider a lasting solution to a problem without understanding its profound nature. Therefore, defining the current crisis as a « natural disaster », i.e. « physical risks » in the sense of the TFCD classification, makes it possible to base recovery options and solutions on decisive hypotheses and to steer them in the right direction. This, of course, makes it inevitable that environmental parameters will be at the heart of plans to develop a « world after ».
It is also common sense, as we now know the close links between health disasters and physical hazards of an environmental nature, the rate of occurrence and intensity of which are expected to accelerate over the next decade. Those responsible include deforestation, which brings humans into contact with new species and bacteria, air pollution (Sox Nox and fine particle emissions increase the viscosity of blood which helps to bind viruses) which already kills around 50,000 people every year in France alone, and electromagnetic pollution which interferes with human physiology. Of course, climate change is also an accelerator of tropical pandemics, which are expected to affect several billion people in the 21st century, combined with unprecedented migratory flows under the pressure of « unbearable » climatic conditions over more than 20% of the Earth’s surface, as we are reminded by a study by American academics published in May in the scientific journal « PNAS ».
These alarming prospects, when analyzed through the prism of the economic crisis that we deliberately provoked to mitigate the consequences of the health catastrophe, do not fail to evoke the conclusions of Nicholas Stern’s famous report, which can be summarized as follows: if we fail to devote at least 1% of GDP to the fight against climate change, inaction could cost between 5% and 20% of global GDP, an impact, Stern points out, « comparable to the devastating effects of the two world wars and the depression of the 1930s ». What should really alarm us is that we are already there!
The trade-off proposed by Stern is astonishingly topical: it is now emerging as the intrinsic linchpin of any budgetary calibration of the recovery plans envisaged and their necessary greening, as Ursula von der Leyden, Angela Merkel and Bruno Le Maire have reminded us. However, the only difference is that until now it was thought to be an intergenerational trade-off and that, according to Covid, we will also be able to benefit from it.
We must also consider Stern’s other central message: we are entering the reign of uncertainty, which sweeps away all our certainties and becomes the norm. Not only is the level of uncertainty growing at an almost exponential rate, but it is also changing in nature and becoming less linear and therefore less predictable. This means, as current tensions teach us, that all economic, social and geopolitical maps are being reshuffled. Or that long-term decisions may be less effective than more agile initiatives, as demonstrated by the emergence of « tactical urbanism ». This is the very nature of the physical risks that we now must deal with in defining a new responsible capitalism.
by Stéphane Voisin, Financial Analyst specialising in Sustainable Finance & Responsible Investment and Member of the ICR’s College of Experts