Extreme weather caused by climate change could wreak US$38 trillion of damage on food sector value chains and infrastructure, according to a new report by the First Sentier MUFG Sustainable Investment Institute. Significantly increasing climate risks and extreme weather hazards demonstrate the need for businesses and investors to take action to support food security, food system resilience, and commercial returns, the report said. Global food systems must meet demand rising at a compound annual growth rate of 1.26% over the next decade. But they face a higher likelihood of insecurity and commercial losses, due partly to the rising complexity and cost of production. Six key hazards – temperature extremes, heavy precipitation, flooding, droughts, extreme storms, and compound events – have the potential to reduce agricultural yields by up to 20% in a 2.5oC global warming by 2050 scenario, the report’s base case. Institute Director Sudip Hazra said investor decision-making and engagement strategies in agricultural and food system companies needed to take account of these risks. “Investors can play a critical role in de-risking agricultural businesses from the escalating climate impacts by supporting their companies to consider and disclose the areas relating to best practice across a holistic reporting framework,” he said. “This can include value chain maps outlining core partners and regions, relevant physical climate impacts, related risks and opportunities, and efforts to ensure business resilience.”
