Ahead of its Annual Meeting in Davos, the World Economic Forum has released the Global Risks Report 2025. It’s a revealing snapshot of what’s keeping the political and business elite up at night.

Asked about longer-term risks, most respondents cited concerns about extreme weather events. That should come as no surprise. As the report notes, “impacts of environmental risks have worsened in intensity and frequency since the Global Risks Report was launched in 2006”. Extreme weather events are only expected to become more frequent and severe in coming years.

To put the scale of environmental risk concerns in perspective, the top four risks that respondents estimate will have the most severe impact over the next decade are all environmental.

Climate risk is no longer a distant, theoretical concern. In the shorter term (2 years), respondents see extreme weather as likely to be the second most impactful risk.

By contrast, the survey suggests that world leaders are not currently preoccupied with the risk of economic shocks. Economic risks do not feature in the top ten either for short term or 10-year risks.

This year’s economic optimism marks a change from the previous year’s report, which saw both inflation and economic downturn feature as top ten risks.

Systemic risk

Does the relative lack of concern about economic stability reveal confidence or a lack of foresight? Plausibly, the spectre of climate change is – understandably – obscuring other systemic threats.

Of course, as the Risks Report points out, risk is interconnected.

Extreme weather can heighten inequality and geopolitical tensions. Conflict has unpredictable economic consequences and heightens social instability. Misinformation and social polarisation can both be exacerbated by, and impede our responses to, disruptive pandemics.

Notably, inequality is listed as a top ten risk in the Annual Report, categorised as a ‘societal risk.’ But distribution cannot be neatly separated from hard economic questions. Levels of inequality are determined, in part, by economic policy choices. And highly unequal societies perform differently from more equal societies.  

Volatile times

2025 has already been marked by market uncertainty. Take for instance the phenomenon of rising in US yields producing volatility in UK markets and creating a headache for Downing Street.

We don’t yet know precisely what form Donald Trump’s tariffs will take, and how disruptive they will be. We do know that his tenure will be anything but predictable.

Economic consequences of climate change

An alternative way to appreciate the prioritisation of climate risk is to appreciate that climate change is the systemic risk par excellence. The effects are global, complex and unavoidable.

Our responses to climate change also have second order consequences. Note, for instance, how many insurers chose not to renew fire insurance policies in some areas of California prior to the January Los Angeles fires.

Shifts in the insurance market don’t just increase risks to property owners. As researchers point out, homeowners insurance is often a condition of getting a loan. As insurance becomes more expensive – in some places, unavailable at virtually any price – the cost and supply of housing could be drastically affected.

Moreover, efforts to mitigate the effects of climate change bring their own costs (and opportunities).

Imagining 2025

For more on what the year might look like, don’t miss Finalto’s 2025 Watchlist. In Watchlist 2025: The World at a Crossroads, we consider sharply diverging paths for the world in 2025 and beyond. These scenarios are intended as thought experiments to help us appreciate the stakes of the current moment – and the risks and opportunities on the next 12 months. Download your copy here.

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