Climate: change for the middle class
There is no doubt that climate events are on the rise, and that people around the world are increasingly vulnerable to the impacts of climate change. Worldwide, economic losses from natural catastrophes increased from USD 528 billion from 1981 to 1990 to USD 1,213 billion from 2001 to 2010.1
While there have been several studies analysing this, few have focused on the estimated one billion people that make up the world's middle-class - characteristically one of the most dynamic social groups globally..
In sheer numbers, assets, and monetary power, the middle-class make-up a powerful social group in most countries. Moreover, as a group increasingly at risk from the impacts of climate change, they also have the potential to be a driving force in demanding better climate policy from governments. In this study therefore, we at UBS, analyse the impacts of climate change on the city-dwelling middle-class across the globe.
Global urban risk
Our study reveals increasing risk to the wealth of middle-class households, as well as efforts to adapt to the effects of climate change. Over 75% of the world’s top-20 wealthiest cities are impacted by factors like temperature mortality and exposure to floods. The impacts of this are being felt by its residents, where our analysis reveals that middle-class spending patterns are noticeably different in cities that are most exposed to climate change risk, with a higher proportion of household budget spent on housing and a lower proportion given over to high ticket discretionary spend . Despite this focus on property, uptake of property insurance is low. Swiss Re estimated that total global economic losses from natural disasters have averaged around USD 180 billion annually in the last decade, of which 70% is uninsured.2
We at UBS, believe that as climate change threatens to erode middle-class wealth, the cities in which they reside will also suffer. Cities are the drivers of economic growth, making their health and wealth crucial to the prosperity of global economies. Moreover, the global interconnectedness of economies means local disasters can impact the world economy.
Our study highlights the need for governments in affected areas to take a more proactive approach toward insurability, or risk suffering major economic shocks. We believe it will take adaption, investments in infrastructure, and new levels of human ingenuity to safeguard the middle class against the impacts of climate change.
Views and opinions expressed are presented for informational purposes only and are a reflection of UBS Asset Management’s best judgment at the time a report or other content was compiled. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions contained in the content of this webpage have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith but no responsibility is accepted for any errors or omissions. All such information and opinions are subject to change without notice but any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed. Source for all data/charts, if not stated otherwise: UBS Asset Management.
Any market or investment views expressed are not intended to be investment research. Materials have not been prepared to address requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this webpage does not constitute a distribution, nor should it be considered a recommendation to purchase or sell any particular security or fund. The materials and content provided will not constitute investment advice and should not be relied upon as the basis for investment decisions. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. A number of the comments in the content of this webpage are considered forward-looking statements. Actual future results, however, may vary materially. Past performance is no guarantee of future results. Potential for profit is accompanied by possibility of loss.
© UBS 2018 The key symbol and UBS are among the registered and unregistered trademarks of UBS.