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Visualized: A Global Risk Assessment of 2021 And Beyond

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Visualized: A Global Risk Assessment of 2021 And Beyond

Risk is all around us. After the events of 2020, it’s not surprising that the level and variety of risks we face have become more pronounced than ever.

Every year, the World Economic Forum analyzes the top risks in the world in its Global Risks Report. Risks were identified based on 800+ responses of surveyed leaders across various levels of expertise, organizations, and regional distribution.

Which risks are top of mind in 2021?

The World’s Top Risks by Likelihood and Impact

According to WEF’s risk assessment methodology, all the global risks in 2021 fall into the following broad categories:

  • 🔵 Economic
  • 🟢 Environmental
  • 🟠 Geopolitical
  • 🔴 Societal
  • 🟣 Technological

It goes without saying that infectious diseases have now become one of the top societal risks on both metrics of likelihood and impact.

That said, environmental risks continue to dominate the leaderboard, accounting for five of the top 10 risks by impact, especially when it comes to climate action failure.

Several countries are off-track in meeting emissions goals set by the Paris Climate Agreement in 2015, while the pandemic has also delayed progress in the shift towards a carbon-neutral economy. Meanwhile, biodiversity loss is occurring at unprecedented rates.

RankTop Risks by LikelihoodTop Risks by Impact
#1🟢Extreme weather🔴Infectious diseases
#2🟢Climate action failure🟢Climate action failure
#3🟢Human environmental damage🟠Weapons of mass destruction
#4🔴Infectious diseases🟢Biodiversity loss
#5🟢Biodiversity loss🟢Natural resource crises
#6🟣Digital power concentration🟢Human environmental damage
#7🟣Digital inequality🔴Livelihood crises
#8🟠Interstate relations fracture🟢Extreme weather
#9🟣Cybersecurity failure🔵Debt crises
#10🔴Livelihood crises🟣IT Infrastructure breakdown

As for other risks, the prospect of weapons of mass destruction ranks in third place for potential impact. In the global arms race, a single misstep would trigger severe consequences on civil and political stability.

New Risks in 2021

While many of the risks included in the Global Risks Report 2021 are familiar to those who have read the editions of years past, there are a flurry of new entries to the list this year.

Here are some of the most interesting ones in the risk assessment, sorted by category:

Societal Risks

COVID-19 has resulted in a myriad of knock-on societal risks, from youth disillusionment and mental health deterioration to livelihood crises. The first two risks in particular go hand-in-hand, as “pandemials” (youth aged 15-24) are staring down a turbulent future. This generation is more likely to report high distress from disrupted educational and economic prospects.

At the same time, as countries prepare for widespread immunization against COVID-19, another related societal risk is the backlash against science. The WEF identifies vaccines and immunization as subjects susceptible to disinformation and denial of scientific evidence.

Economic Risks

As monetary stimulus was kicked into high gear to prop up markets and support many closed businesses and quarantined families, the economic outlook seems more fragile than ever. Debt-to-GDP ratios continue to rise across advanced economies—if GDP growth stagnates for too long, a potential debt crisis could see many businesses and major nations default on their debt.

With greater stress accumulating on a range of major industries such as travel and hospitality, the economy risks a build-up of “zombie” firms that drag down overall productivity. Despite this, market valuations and asset prices continue to rise, with equity markets rewarding investors betting on a swift recovery so far.

Technological Risks

Last but not least, COVID-19 has raised the alert on various technological risks. Despite the accelerated shift towards remote work and digitalization of entire industries, the reality is that digital inequality leaves those with lower digital literacy behind—worsening existing inequalities.

Big Tech is also bloating even further, growing its digital power concentration. The market share some companies hold in their respective sectors, such as Amazon in online retail, threatens to erode the agency of other players.

Assessing the Top 10 Risks On the Horizon

Back in mid-2020, the WEF attempted to quantify the biggest risks over an 18-month period, with a prolonged economic recession emerging on top.

In this report’s risk assessment, global risks are further classified by how soon their resulting threats are expected to occur. Weapons of mass destruction remain the top risk, though on a much longer scale of up to 10 years in the future.

RankRisk%Time Horizon
#1🟠Weapons of mass destruction62.7Long-term (5-10 years)
#2🔴Infectious diseases58Short-term risks (0-2 years)
#3🔴Livelihood crises55.1Short-term risks (0-2 years)
#4🔵Asset bubble burst53.3Medium-term risks (3-5 years)
#5🟣 IT infrastructure breakdown53.3Medium-term risks (3-5 years)
#6🔵Price instability52.9Medium-term risks (3-5 years)
#7🟢Extreme weather events52.7Short-term risks (0-2 years)
#8🔵Commodity shocks52.7Medium-term risks (3-5 years)
#9🔵Debt crises52.3Medium-term risks (3-5 years)
#10🟠State collapse51.8Long-term (5-10 years)

Through this perspective, COVID-19 (and its variants) remains high in the next two years as the world scrambles to return to normal.

It’s also clear that more economic risks are taking center stage, from an asset bubble burst to price instability that could have a profound effect over the next five years.

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UN Sustainable Development Goals: How Companies Stack Up

Are companies making progress in meeting the UN Sustainable Development Goals? This tracker shows how companies are measuring up.

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Sustainable Development Goals

The UN SDGs: How Companies Stack Up

Environmental, social, and governance (ESG) investing witnessed a breakthrough year in 2020 with the most fund inflows on record.

Importantly, for companies that are judged according to ESG metrics, one way to track their progress is through their alignment to the UN Sustainable Development Goals (SDGs).

Established in 2012, the UN SDGs are a blueprint for creating a more sustainable future by 2030 that have been adopted by 193 countries worldwide.

As investors and stakeholders pay closer attention to sustainability concerns, this graphic from MSCI breaks down how companies stack up according to their alignment to the UN SDGs.

How Were Companies Measured?

To track companies net contribution to the UN SDGs, companies were scored by their positive or negative contribution to each of the 17 goals.

The 17 UN SDGs are designed to achieve three primary objectives by 2030:

  • Protect the planet
  • End poverty
  • Create prosperity and peace for all

Specifically, the framework centers on a discussion paper that was developed in partnership with the OECD in 2018. Company policies, operations, products and services, and practices are analyzed according to reported and publicly available information.

Tracking the Alignment of Companies

Across a universe of 8,550 companies in the MSCI All Country World Index, constituents were measured from strongly aligned to strongly misaligned to the UN SDGs.

Sustainable
Development Goal
Strongly
Aligned
AlignedMisalignedStrongly
Misaligned
1No Poverty089215532
2Zero Hunger24234300
3Good Health and Well-being031514129
4Quality Education831520
5Gender Equality0109290
6Clean Water and Sanitation173253610
7Affordable and Clean Energy43639109587
8Decent Work and Economic Growth2512695217
9Industry, Innovation, and Infrastructure688441379
10Reduced Inequality082812731
11Sustainable Cities and Communities0016719
12Responsible Consumption and Production115855150598
13Climate Action2759495587
14Life Below Water03615192
15Life on Land0012817
16Peace and Justice Strong Institutions013524127
17Partnerships to Achieve the Goal040115222

Source: MSCI ESG Research LLC as of August 11, 2020

Broadly speaking, companies fell mostly in the middle—roughly 38% were aligned while almost 55% were misaligned or neutral. Meanwhile, just 0.2% of companies were strongly aligned to the UN SDGs.

Overall, one of the most strongly aligned goals was Responsible Production and Consumption, with 115 companies meeting this criteria. Specifically, these include companies that are building sustainable infrastructure, energy efficiency, or creating green jobs.

Interestingly, the worst performing goal was also Responsible Production and Consumption, with over five times as many companies (598) strongly misaligned. Along with this goal, both Climate Action and Affordable and Clean Energy each had over 500 companies strongly misaligned.

UN SDGs: A Sector Focus

Unsurprisingly, SDG-alignment varied widely according to company sectors.

Educational companies, for instance, represented the highest level of alignment to Gender Equality. Meanwhile, 18% of 425 utilities companies assessed ended up aligning with Clean and Affordable Energy goals.

As one would expect, the energy sector lagged behind. In 2020, fossil fuels were a key source of revenue for 91% of the companies in the energy business. In fact, just three companies derived over 50% of their revenues from green alternatives: REX American Resources, Renewable Energy Group, and Verbio.

A Call to Action?

Despite the growing wave of interest in ESG investing, the reality is that progress to meet the UN SDGs has been slower going than expected.

However, a greater number of individuals, stakeholders, and activists are sounding the alarm. Today, over 3,000 signatories representing trillions in assets under management have committed to the UN Principles of Responsible Investment, which has established six key actions for ESG investing. Now, many companies are required to report their ESG disclosures in Europe.

Along with these key markers of progress, investors can move the dial by tracking a company’s alignment to sustainable development goals.

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Mapped: The Greenest Countries in the World

The world’s growing focus on sustainability is a clear sign of the times. This map ranks the 40 greenest countries in the world.

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Mapped: The Greenest Countries in the World

From widening wealth disparity to the environmental ramifications of economic development—the growing focus on global sustainability is a clear sign of the times.

Research reveals that when a sustainable ethos is applied to policy and business, it typically bodes well for economies and people alike. By providing benchmarks for those decisions, indexes like Yale’s Environmental Performance Index (EPI) can be critical to measuring national sustainability efforts.

The above map interprets the EPI ranking of 180 economies across 32 environmental health indicators by narrowing in on the top 40 greenest countries.

Who’s the Greenest of them All?

Despite the decades-long trend of globalization, national environmental policies have proved to be widely divergent. The EPI report confirms that those policies—and their positive results—are highly correlated with national wealth.

This is evidenced in the global EPI distributions, seen below:

OVERALL RANKCOUNTRYSCOREREGIONAL RANK
1Denmark82.51
2Luxembourg82.32
3Switzerland81.53
4United Kingdom81.34
5France805
6Austria79.66
7Finland78.97
8Sweden78.78
9Norway77.79
10Germany77.210
11Netherlands75.311
12Japan75.11
13Australia74.912
14Spain74.313
15Belgium73.314
16Ireland72.815
17Iceland72.316
18Slovenia721
19New Zealand71.317
20Canada7118
21Czech Republic712
22Italy7118
23Malta70.720
24United States of America69.321
25Greece69.13
26Slovakia68.34
27Portugal6722
28South Korea66.52
29Israel65.81
30Estonia65.35
31Cyprus64.86
32Romania64.77
33Hungary63.78
34Croatia63.19
35Lithuania62.910
36Latvia61.611
37Poland60.912
38Seychelles58.21
39Singapore58.13
40Taiwan57.24
41Bulgaria5713
42United Arab Emirates55.62
43North Macedonia55.414
44Chile55.31
45Serbia55.215
46Brunei Darussalam54.85
47Kuwait53.63
48Jordan53.44
49Belarus531
50Colombia52.92
51Mexico52.63
52Costa Rica52.54
53Armenia52.32
54Argentina52.25
55Brazil51.26
56Bahrain515
57Ecuador517
58Russia50.53
59Venezuela50.38
60Ukraine49.54
61Uruguay49.19
62Albania4916
63Antigua and Barbuda48.510
64Cuba48.411
65St. Vincent and Grenadines48.411
66Jamaica48.213
67Iran486
68Malaysia47.96
69Trinidad and Tobago47.514
70Panama47.315
71Tunisia46.77
72Azerbaijan46.55
73Paraguay46.416
74Dominican Republic46.317
75Montenegro46.317
76Gabon45.82
77Barbados45.618
78Bosnia and Herzegovina45.418
79Lebanon45.48
80Thailand45.47
81Suriname45.219
82Mauritius45.13
83Tonga45.18
84Algeria44.89
85Kazakhstan44.76
86Dominica44.620
87Moldova44.47
88Bolivia44.321
89Uzbekistan44.38
90Peru4422
91Saudi Arabia4410
92Turkmenistan43.99
93Bahamas43.523
94Egypt43.311
95El Salvador43.124
96Grenada43.124
97Saint Lucia43.124
98South Africa43.14
99Turkey42.619
100Morocco42.312
101Belize41.927
102Georgia41.310
103Botswana40.45
104Namibia40.26
105Kyrgyzstan39.811
106Iraq39.513
107Bhutan39.31
108Nicaragua39.228
109Sri Lanka392
110Oman38.514
111Philippines38.49
112Burkina Faso38.37
113Malawi38.37
114Tajikistan38.212
115Equatorial Guinea38.19
116Honduras37.829
117Indonesia37.810
118Kiribati37.711
119São Tomé and Príncipe37.610
120China37.312
121Samoa37.312
122Qatar37.115
123Zimbabwe3711
124Central African Republic36.912
125Dem. Rep. Congo36.413
126Guyana35.930
127Maldives35.63
128Uganda35.614
129Timor-Leste35.314
130Laos34.815
131Sudan34.816
132Kenya34.715
133Zambia34.715
134Ethiopia34.417
135Fiji34.416
136Mozambique33.918
137Eswatini33.819
138Rwanda33.819
139Cambodia33.617
140Cameroon33.621
141Viet Nam33.418
142Pakistan33.14
143Micronesia3319
144Cabo Verde32.822
145Nepal32.75
146Papua New Guinea32.420
147Mongolia32.221
148Comoros32.123
149Guatemala31.831
150Tanzania31.124
151Nigeria3125
152Marshall Islands30.822
153Niger30.826
154Republic of Congo30.826
155Senegal30.728
156Eritrea30.429
157Benin3030
158Angola29.731
159Togo29.532
160Mali29.433
161Guinea-Bissau29.134
162Bangladesh296
163Vanuatu28.923
164Djibouti28.135
165Lesotho2836
166Gambia27.937
167Mauritania27.738
168Ghana27.639
169India27.67
170Burundi2740
171Haiti2732
172Chad26.741
173Solomon Islands26.724
174Madagascar26.542
175Guinea26.443
176Côte d'Ivoire25.844
177Sierra Leone25.745
178Afghanistan25.58
179Myanmar25.125
180Liberia22.646

Regional grouping in the report include: Global West, Asia-Pacific, Eastern Europe, Former Soviet States, Greater Middle East, Latin America & Caribbean, Southern Asia, and Sub-Saharan Africa

Scandinavian countries, which tend to have a high GDP per capita, show strong and consistent results across EPI parameters. Denmark for instance—which ranks first overall—leads the world in slowing its growth in CO2 emissions. Meanwhile, neighbor Sweden leads in landfill and recycling treatment, while wastewater treatment is led by a handful of countries within and beyond Scandinavia including Denmark, Finland, the Netherlands, Singapore, and Sweden.

In North America, Canada claims top spot in the biodiversity and habitat category, while the U.S. ranks sixth in agricultural diversity globally. In Asia, Singapore leads the world in fishery health and sustainability.

Ultimately, it appears the world’s greenest countries tend to focus on all areas of sustainability, while laggard countries show more uneven performance across categories.

What Does “Green” Mean?

Each high-level performance indicator with the EPI, like “environmental health”, is broken into subsections. Nations are scored on each subsector on a scale up to 100. As a result, multiple countries can rank first in any given category.

By evaluating national sustainability on a scale that is unrelated to other nations, we get a clearer idea of comparative national progress, beyond a basic ranking.

For instance, 30 countries tie for first in marine protection, all with scores of 100. This shows that many economies are prioritizing this area of sustainability.

The EPI categories and subsectors are shown in the diagram below:

Greenest Countries in the World Supplemental EPI Index

Each section is weighted differently, and is reflected as a percentage within the index. For example, Ecosystem Vitality accounts for 60% of the EPI, Climate Change makes up 24% of a country’s score, and CO2 emission reduction is weighted at 13.2%.

The Cost of Being Green

Infrastructure costs are one reason why wealthier nations tend to fare better across sustainability measures. Everything from air pollution reduction and water treatment, to hazardous waste control and mitigation of public health crises are especially expensive—but have a huge potential impact on citizens.

This trend can be seen the scatterplot, which demonstrates the distribution of economies evaluated by the EPI:

Greenest Countries in the World Main Image Supplemental Comparing GDP to EPI Score

For a more detailed look, the table below highlights the GDP per capita of each of the top 40 greenest countries, based on data from the World Bank and Statista:

COUNTRYEPI SCOREGDP Per CapitaRANK
Denmark82.560,1701
Luxembourg82.3114,7052
Switzerland81.581,9943
United Kingdom81.342,3304
France8040,4945
Austria79.650,1386
Finland78.948,7837
Sweden78.751,6158
Norway77.775,4209
Germany77.246,44510
Netherlands75.352,33111
Japan75.140,24712
Australia74.955,06013
Spain74.329,60014
Belgium73.346,42115
Ireland72.878,66116
Iceland72.366,94517
Slovenia7225,94618
New Zealand71.342,08419
Canada7146,19520
Czech Republic7123,49521
Italy7133,22822
Malta70.729,82123
United States of America69.365,29824
Greece69.119,58325
Slovakia68.319,26626
Portugal6723,25227
South Korea66.531,84628
Israel65.843,59229
Estonia65.323,72330
Cyprus64.827,85831
Romania64.712,92032
Hungary63.716,73233
Croatia63.114,93634
Lithuania62.919,60235
Latvia61.617,82936
Poland60.915,69337
Seychelles58.217,44838
Singapore58.165,23339
Taiwan57.225,87340

Despite the strong correlation between GDP per capita and EPI score, developing countries do not have to abandon sustainability efforts. China for instance leads the world in the adoption of electric vehicle technology.

Post-Pandemic Outlook

Although some rankings can seem prosaic, indexes like the EPI provide a helpful benchmark for economies to compare efforts. It also allows governments to iterate and build upon environmental strategies and investments by highlighting what is and isn’t working.

CO2 emissions, for instance, are a major driver of climate change. Although the global economic stall has led to a temporary dip of CO2 emissions in early 2020 (a slower growth rate than the 11% expected rise), global emissions still continue.

However, the EPI shows that investments have impact. High-level sustainability efforts—political commitment, media coverage, regulations—can deliver results, even at the grassroots level.

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