The climate wars

Why rising temperatures mean rising conflict

With disputes over scarce resources intensifying, we look at the geopolitical and investment implications.

By hindering the provision of fresh water, food and electricity, climate change is starting to undermine livelihoods and strain government finances, causing growing tensions within and between countries, especially where it intersects with rapid population growth.

According to the UN, 3.2 billion people live in agricultural areas with high, or very high, water shortages. Of them, 1.2 billion live in severely water-constrained agricultural areas.1 Disputes over access to fresh water are becoming increasingly common.

Meanwhile, rising temperatures and drought, combined with overpopulation, over-farming and deforestation, are leading to an alarming rise in desertification. The UN estimates around 30 million acres of arable land across the globe are turned into desert every year.2

Rich nations beware

While poorer nations are vulnerable, richer countries should not consider this someone else’s problem. For a start, instability could prove a breeding ground for terrorist groups that aspire to damage Western interests, as seen in the Sahel with the rise of al-Qaeda in the Islamic Maghreb and Al Murabitun. That not only adds to the risk of further terrorist attacks on the West, but will inevitably suck western countries into conflict zones.

The worsening security situation is leading to soaring migration. According to the Institute for Economics and Peace, 1.2 billion people in 31 countries that are not sufficiently resilient to withstand ecological threats are set to be displaced by 2050.3 It seems inevitable many will find their way to the borders of richer nations.4

These issues are starting to impact richer nations directly. For instance, an acute shortage of water in southern Europe and southwestern US states means some countries are facing food insecurity problems.

The European Environmental Agency says droughts and water scarcity are putting cultivation in Europe under pressure.5 Similarly, the US Congress warned in 2018 that rising temperatures, extreme heat, drought, wildfires and heavy downpours will increasingly disrupt US agricultural output.

“While countries’ exposure to these events is often outside their control, by preparing well they can limit the consequences. Turkey had no functioning national fleet of firefighting aircraft, contributing to record damages from this year’s fires,” says Thomas Dillon, senior environmental, social and governance (ESG) macro analyst at Aviva Investors.

Julie Zhuang, global equities portfolio manager at Aviva Investors, is assessing companies helping nations adapt to water scarcity.

“It makes sense to invest in companies that help the world adapt to the consequences of global warming,” she says.

Rising sea levels

Arguably climate change’s gravest threat comes from rising sea levels. The global mean sea level has risen about eight to nine inches (21–24 cm) since 1880, with about a third of that coming in the last two and a half decades. 

Figure 1: Sea level since 1880 (in mm)6
Source: Climate.gov, January 25, 2021

Rising sea levels are putting economic pressure on countries in coastal areas of the Indian Ocean, notably Bangladesh and Myanmar, while large tracts of their agricultural land are in low-lying areas heavily exposed to rising sea levels.

For several small island states, sea-level rise could jeopardise their very survival

For several small island states, sea-level rise could jeopardise their survival, with far-reaching implications. The US, for instance, has several important military installations in the Western Pacific.

It is not just foreign military bases that are vulnerable. In June 2019, the US military said 46 of its domestic bases were ‘particularly threatened’ by the effects of climate change.7

As polar regions warm, ice is melting. In the Arctic, that is making the region’s vast mineral wealth more readily accessible, potentially putting the eight Arctic nations, including the US, Russia and China, on a collision course.

Control of shipping routes could bring significant advantages to countries and companies looking for a competitive edge, prompting one former NATO commander to warn global leaders against proceeding “down the icy slope towards a zone of competition, or worse a zone of conflict".8

Implications for instability

Solutions to climate change are also not without risks. Should the world successfully wean itself of fossil fuels, that could have dire economic implications for Russia, Saudi Arabia and other petrostates in the Middle East and elsewhere. Social unrest could have implications for regional and global stability.

Climate change looks set to affect international security in myriad ways over the coming years

Whether from increased migration and local conflicts, as in the dispute over the building of the GERD, or from changing patterns of stability and instability in great-power relations, climate change looks set to affect international security in myriad ways over the coming years. Investors should take note.

Want more content like this?

Sign up to receive our AIQ thought leadership content.

Please enable javascript in your browser in order to see this content.

I acknowledge that I qualify as a professional client or institutional/qualified investor. By submitting these details, I confirm that I would like to receive thought leadership email updates from Aviva Investors, in addition to any other email subscription I may have with Aviva Investors. You can unsubscribe or tailor your email preferences at any time.

For more information, please visit our Privacy Policy.

Important information

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK Issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: St Helens, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In France, Aviva Investors France is a portfolio management company approved by the French Authority “Autorité des Marchés Financiers”, under n° GP 97-114, a limited liability company with Board of Directors and Supervisory Board, having a share capital of 17 793 700 euros, whose registered office is located at 14 rue Roquépine, 75008 Paris and registered in the Paris Company Register under n° 335 133 229. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 1 Raffles Quay, #27-13 South Tower, Singapore 048583. In Australia, this material is being circulated by way of an arrangement with Aviva Investors Pacific Pty Ltd (AIPPL) for distribution to wholesale investors only. Please note that AIPPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIPPL in respect of any matters arising from, or in connection with, this material. AIPPL, a company incorporated under the laws of Australia with Australian Business No. 87 153 200 278 and Australian Company No. 153 200 278, holds an Australian Financial Services License (AFSL 411458) issued by the Australian Securities and Investments Commission. Business Address: Level 30, Collins Place, 35 Collins Street, Melbourne, Vic 3000, Australia.

The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom. Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is registered with the Ontario Securities Commission (“OSC”) as a Portfolio Manager, an Exempt Market Dealer, and a Commodity Trading Manager. Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.

Related views