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Natural disasters caused losses worth $32 billion in just the first six months of 2015, a report by global research and brokerage house UBS said. The monetary losses arising from climate change are diverting consumption expenditure away from luxury goods, the report added. Los Angeles, Taipei, Tokyo, Mumbai, Shanghai and New Orleans are the most affected by climate.
“The financial costs of climate-related events for both governments and taxpayers are already apparent. Despite the increased threat of natural disasters, the global middle class is not well insured,” the report titled ‘Climate change: a risk to the global middle class’, said. Economic productivity also falls when climate change disasters strike.
The report was based on the premise that the global middle class, estimated at around one billion people worldwide, and with substantial assets and political influence, is key to social order and economic growth. Given the group’s size, spending power and dynamism, the erosion of middle-class wealth through climate change threatens both economic and socio-political stability.
To examine the impact of climate change on the middle class, UBS looked at middle-class consumption in 215 cities around the world and compared consumption patterns to the level of climate-change risk in those cities. The study found that in cities most at risk from climate change, such as Los Angeles, Tokyo and Shanghai, spending priorities are noticeably different, with the middle class spending between 0.6 and 0.8 percent more on housing when compared to the respective national average. To compensate, middle-class households spend proportionately less on luxuries, entertainment and durable goods.
In less developed and newly industrialized nations, the middle class is typically underinsured, with emerging markets showing very low insurance 0.12 per cent for China and 0.07 per cent for India, increasing the financial impact from a climate change disaster. In fact, 91 per cent of assets lost in Asia is uninsured.
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