GCC has significant financial means to mitigate climate risks, S&P says

GCC countries have significant resources to soften or avoid climate risks for now, a report has said.

Physical risks from climate change are rising globally and GCC countries could become more vulnerable to their economic and financial effects over the next few decades if investments in adaptation and resilience stagnate, S&P Global Ratings said on Monday.

Extreme heat and water stress caused by global warming could result in an annual drop of up to 8 per cent in the region’s gross domestic product by 2050, without risk mitigation and adaptation, the report said.

“GCC governments have some of the highest assets-to-GDP ratios among the countries we rate,” it said.

“Consequently, they have significant financial means to invest in adaptation and resilience measures.”

To assess the economic impact of physical climate risks, S&P applied four shared socioeconomic pathways (SSP) scenarios in its Lost GDP: Potential impacts of physical climate risks report released last month before the start of Cop28.

SSPs are a set of scenarios for projected greenhouse gas emissions and temperature changes, and include changes in socioeconomic systems, including population growth, economic growth, resource availability and technological developments.

The scenarios are SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5.

SSP1-2.6 is a low-emissions scenario in which the world shifts gradually but consistently towards a more sustainable path.

On the other end of the spectrum is SSP5-8.5, which has high emissions and limited mitigation measures.

Compared with other regions, the GCC shows the third-largest GDP at risk of a drop of about 8 per cent annually by 2050 without adaptation under SSP3-7.0, the report said.

Water stress and extreme heat events are not uncommon in the GCC.