UBS has brought out a study charting what it sees as the impact on the world's affluent from climate change.

The world’s middle class – made up of around one billion people - has much to lose from the negative impact of climate change but also has influence and wealth to be able to push for reform, according to a study by UBS into the topic.

The Swiss bank says climate change, or man-made global warming, will cost affluent persons dearly but balances such a warning with the argument that the middle class in regions such as Asia are best placed to push for policymakers to try and deal with the challenge.

In its report, “Climate change: a risk to the global middle class”, UBS said last year witnessed the “hottest temperatures on record”; it said natural disasters caused 16,200 deaths and total losses of $32 billion in the first half of 2015. It goes on to say that middle-class residents of cities at high risk spend more of their household budget on housing compared to the respective national averages and less on luxuries, entertainment and household durable goods.

Of note for Asia-based readers is that most of the global middle class lives in Southeast Asia, the region with the fastest urban population growth in recent years. Alarmingly, UBS said, some 91 per cent of weather-related losses in Asia are uninsured. By comparison, one-third of weather related losses in the US are uninsured, which brings the total sum of damages to $1.5 trillion in total economic losses from 1980 to 2014.

Leaders of major industrialised nations, such as the UK, US and Germany, are committed to tackling climate change by attempting to curb carbon emissions, develop alternative energy sources and promote energy efficiency. The latest United Nations Framework Convention on Climate Change (UNFCCC) agreement in Paris was signed by all 196 participating countries.

A number of methods, such as carbon taxes, outright bans on certain technologies, subsidies for alternative sources, among other ideas, have been suggested. While transnational bodies such as the Intergovernmental Panel on Climate Change (IPCC) say the majority of scientists agree that human activity is affecting the climate and contributing to global warming, there remains a small but vocal group of dissenters who query the “alarmist” case and fear it will cause unjustified restrictions on economic activity.

Price
UBS says that while the world’s middle class faces a high price if the alarmist case is borne out, it is also a strong force in pushing for change.

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. UBS said 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 per cent more on housing when compared to the respective national average. In the US, middle class residents of high climate-change risk cities spend between $800 and $1,600 more annually on housing compared to a lower risk city. To compensate, middle-class households spend proportionately less on luxuries, entertainment and durable goods.

“The world's largest global cities contain nearly a quarter of the global population and generate around half of global GDP. The concentration of both people and wealth in urban centres means cities are crucial not just to national economies, but also to global companies and their investors,” UBS said.

In the US, between 2011 and 2013, the cost of US federal disaster relief for hurricanes, floods and droughts totalled $136 billion, equating to $400 annually per household.

In less developed and newly industrialised nations, the middle class is typically underinsured, with emerging markets showing very low insurance penetration relative to property value (e.g. 0.12 per cent for China and 0.07 per cent for India).

In 2000, nearly half of the global population of 6 billion people lived in cities; the United Nations expects this figure to rise to 60 per cent by 2025.

UBS said news coverage of recent geopolitical developments sometimes overlooks the climate issue. “While news coverage focuses on Syrians fleeing war and economic collapse for Europe, the fact that Syria suffered an unprecedented drought from 2006 to 2011 is rarely mentioned,” it said.