One of the aims of Sustainable Development Goals (SDGs) put forward by the United Nations is to reduce “exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters” among the poor and those who may be otherwise vulnerable. To measure progress with respect to this goal the U.N. seeks to “significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters.”
Based on the U.N. goal, here I’ll focus on recent trends in direct economic losses relative to global gross domestic product (GDP). The evidence indicates that over the past 30 years, disaster losses as a percent of GDP have decreased. That is very good news.
Before proceeding, let me make a few things perfectly clear. Climate change poses significant risks to our collective future, and aggressive action is imperative to decarbonize our economies and reduce vulnerability to the effects of climate. In addition, my views on extreme weather and climate change are fully in line with the assessment reports of the Intergovernmental Panel on Climate Change (IPCC), the U.S. National Climate Assessment (USNCA) and the World Meteorological Organization (WMO). In fact, my work along with colleagues is a part of these assessments.
To look for changes in climate, as a consequence of greenhouse gas emissions or other causes, it will always be best to look directly at weather and climate data (something I promise to do in future columns here), and not at economic data. However, it is just logical that after accounting for the effects of growing population, wealth, buildings, etc. any time series of economic loss from extreme weather should be consistent with an independent climatological record of extreme weather events.
The U.N looks at direct economic losses from disasters relative to GDP because the global economy is typically growing. There are more people, more property, more wealth to be damaged as a consequence of extreme events. Consequently, it would be easy to misinterpret a growing tally of economic loss, such as a simple count of disasters that cause a billion dollars or more of damage. It is possible that disaster losses would increase, but we are still succeeding with respect to the goals of the U.N. SDGs.
Think of it like this. Imagine your annual salary is $50,000 and your monthly rent is $1,000. A few years later your salary has increased to $100,000 and your rent has increased to $1,500. In the former scenario, monthly rent was 2% of your annual income, but in the latter it was only 1.5%. So even though your rent increased by 50%, you are better off in the second scenario because your income increased by an even greater amount. This logic is why GDP is often used to place economic time series into context, and is a common practice across many policy issues.
To track progress with respect to the U.N. SDGs indicator – related to direct losses from disasters as a proportion of GDP – I collected data on direct economic losses from Munich Re and Aon, two companies in the global reinsurance industry that have tabulated such data for many years. I also used data on global GDP from the World Bank. My analysis is reported in full in a peer-reviewed paper published earlier this year.
The figure below shows updated global direct economic losses from disasters as a proportion of global GDP over the past 30 years. This data includes earthquakes and tsunamis. For 2019, half-year data from Munich Re (shown in black for 1990 to 2019) and Aon (shown in grey for 2000 to 2019) has been annualized based on the historical relationship of annual first half data with annual totals. There are still two months left in 2019, and as we’ve seen before, a lot can happen in a short amount of time. So 2019 is preliminary. The time series begins when each company claims that their dataset is of sufficient quality for such analyses.
The data show that direct economic losses from disasters have declined (based on a linear trend) over the past 30 years from a bit over 0.3% of global GDP to under 0.25% of global GDP. This is incredibly good news. The world is in aggregate moving in the direction of an indicator of progress under the U.N. SDGs.
Many will be interested in what the data says for weather and climate-related disasters. The figure below shows that data.
Here as well there is very good news to report. The data show that direct economic losses from weather and climate-related disasters have declined (based on a linear trend) over the past 30 years from slightly under 0.3% of global GDP to slightly under 0.2% of global GDP. Great news.
My experiences are that many people find it hard to believe that the world has done increasingly well with respect to catastrophe losses over the past 30 years. One reason for this may be the fact that disasters have become intensely politicized as a part of the climate debate. Some climate advocates, including some climate scientists, use each disaster to portend an apocalyptic future, one that they claim has already arrived. In 2006, the influential Stern Review on Climate change from the United Kingdom predicted increasing disaster losses as a percentage of global GDP.
The evidence however says something else.
It appears that 2019, is on track to continue the record of good news. Robert Muir-Wood of RMS, a leading catastrophe modeling firm, wrote a month ago “Almost three months ago we passed a remarkable record in catastrophe loss. And yet no one seems to want to celebrate it. No banner headlines in the newspapers. . . The first half of 2019 generated the lowest catastrophe insurance loss for more than a decade.” Muir-Wood labelled 2019 “the year of the kitten.” With two months left, cross your fingers.
We can have confidence in the positive progress with respect to the goal of the U.N SDGs to reduce direct disaster losses as a percentage of GDP because this trend is 100% consistent with the assessment reports of the IPCC, USNCA and WMO. This may be one reason why some climate advocates have turned on these authoritative assessments.
Beyond the climate debate, the good news with respect to disaster losses of the past 30 years does not mean that it will continue into the future. We need to understand what we have been doing right, what we are still doing wrong, how much of this trend is due to good luck and how much is due to smart actions. Disasters are far too important to be reduced to a symbolic football in the climate debate.
The bottom line is that there is good news to report on the direct economic losses from disasters over the past 30 years. Let’s celebrate what has been accomplished and make sure that we take actions to ensure that it continues.
Date: Nov 3, 2019