Swiss financial services major UBS has said the climate change inflicted a whopping USD 1.5 trillion loss on the middle-class across the globe between 1980 and 2014, and another USD 32 billion in the first six months of 2015 which was the hottest year on record.
"Consumption patterns of those living in cities which are most at risk for climate change significantly....A whopping USD 1.5 trillion of wealth of the middle class has been lost to climate change across the globe between 1980 and 2014," UBS said in a report released from Zurich today.
The losses are high for a vast majority living in cities, especially in South Asia, which is home to the largest number of global middle class, as most people there are not insured against natural calamities, the report noted.
A whopping 91 per cent of weather-related losses in Asia are uninsured, against one-third of weather-related losses in the US, bringing the total amount of losses to USD 1.5 trillion during 1980-2014.
In 2000, nearly half of the global population of six billion lived in cities and the UN expects this proportion to jump to 60 per cent by 2025.
The report, titled 'Climate change: A risk to the global middle class' also says that the middle class, by virtue of living in cities, have and will continue to bear the brunt of the climate change impact.
Noting that the five costliest events of 2015 were the winter storms in the US, Canada and Europe, it says natural disasters caused as many as 16,200 fatalities and involved losses worth USD 32 billion during the period.
Most of the global middle class lives in Southeast Asia, the region with the fastest urban population growth in recent years, it says. Numbering around 1 billion worldwide, and with substantial assets and political influence, the middle class is the key to social order and economic growth and thus represents the greatest opportunity for change.
Given the size of middle-class and its spending power and
dynamism, erosion of its wealth due to climate change threatens both economic and socio-political stability, says the report.
UBS arrived at the loss data after analysing the consumption of the middle-class in 215 cities and comparing consumption patterns to the level of climate change risks.
The study has 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 there spending between 0.6 and 0.8 per cent more on housing than the national average.
In the US, middle class in high climate-change risk cities spends between USD 800 and USD 1,600 more annually on housing compared to a lower risk city while cutting down on luxury, entertainment and durable goods.
Caroline Anstey, UBS group managing director, said, "The impact of climate change on the global population is only predicted to worsen over time."
Paul Donovan, global economist at UBS Investment Bank, added the middle class' substantial assets and political influence make them key to climate change dialogue.
A key finding of the study is low penetration of insurance against natural calamities despite increased threat.
Even in the US, which has the highest level of insurance penetration globally, as much as 32 per cent of weather-related losses remain uninsured. This has resulted in the US government spending USD 136 billion, which is equal to USD 400 annually per household, between 2011 and 2013 for disaster relief for hurricanes, floods and droughts totalled.
In less developed and newly industrialised nations, the middle class is typically underinsured, with emerging markets showing very low penetration relative to property value with 0.12 per cent in China and 0.07 per cent in India.
Research shows that as temperatures rise beyond 30 degree Celsius, mortality rates rise. As of 2015, nearly 25 per cent of the 215 cities across 15 countries analyzed already had median annual temperatures above 20 degree Celsius.