S&P Global warns up to 4.4% of world GDP at risk

S&P Global Ratings found that up to 4.4% of world GDP could be lost annually by 2050 without adaptation if warming exceeds 2°C, with South Asia facing the highest exposure at around 12% of GDP. The findings sharpen the physical climate risk case for India's adaptation and disclosure priorities.

S&P Global Ratings published a study, "Lost GDP: Potential Impacts Of Physical Climate Risks," analysing four climate scenarios across 137 countries. It found that by 2050, if global warming exceeds 2°C, up to 4.4% of the world's GDP could be lost annually without adaptation. The study examined seven climate hazards using average historical loss rates and sovereign economic and institutional assessments as indicators of countries' readiness to adapt and recover, assuming no adaptation and all hazards occurring simultaneously.

The findings affect developing regions and lower-income countries most severely, with 4.4-fold higher exposure than wealthier counterparts and less preparedness. Under the slow transition scenario, South Asia faces the highest exposure at around 12% of GDP at risk annually by 2050, followed by Sub-Saharan Africa and the Middle East and North Africa at 8% each, while North America and Europe face less than 2%. The report highlights a widening adaptation gap amid slow preparedness and tightening financing conditions.

Policymakers and companies in high-exposure regions should monitor compound climate event risks and the widening adaptation gap driven by higher interest rates and constrained financing. Indian businesses and policymakers, facing the highest regional GDP-at-risk exposure of around 12%, should prioritise physical climate risk assessment, adaptation investment and resilience planning. Understanding the non-linear dynamics of compound hazards is crucial for targeted policy and for disclosing material physical climate risks within evolving ESG reporting expectations.

Key figure — South Asia GDP at risk: around 12% annually by 2050 under slow transition