Climate change impact on global trade

• Frankfurt School researchers publish policy brief together with further research institutions
• Three recommendations how the G20 can make the global economy more resilient
• Policy Brief presented at the T20 Brasil Midterm Conference in Rio de Janeiro

In a policy brief a coalition of researchers from Frankfurt School of Finance & Management together with further leading research institutions across Europe calls on G20 leaders to prioritise the collection and management of granular supply network data. This crucial step is essential for mitigating the increasing risks posed by climate change to global supply chains. The policy brief titled "A Call for Granular Supply Network Data for Navigating the Climate Transition" was published on 7 October by the T20 under Brazil’s G20 Presidency. The T20 is an engagement group consisting of think tanks and research centres from G20 members, guest countries and organisations.

Recent crises such as the COVID-19 pandemic and disruptions in major trade routes have highlighted the vulnerabilities of international supply chains, which are expected to worsen with the intensifying impacts of global warming. Climate change poses severe challenges to supply chains, affecting everything from production sites to transportation infrastructure. Disruptions due to natural disasters, resource shortages, and regulatory changes can propagate through the supply network, leading to significant economic and social costs. The policy brief outlines the need for comprehensive data to identify, quantify, and manage climate risk exposure in supply networks.

Three recommendations:
The researchers identify three main ways the G20 can lead efforts to make the global economy more resilient. First, the brief calls for G20 countries to initiate comprehensive mapping of national supply networks using existing datasets, such as value-added tax and payment flow data. This initiative aims to enhance local resilience against climate-related disruptions.
Second, the G20 should establish an institutional framework for international cooperation to quantify, monitor, and identify global supply network risks. There are limits to national supply network data sets. Therefore, it is necessary to gradually create a cohesive map of the global supply network.
Finally, the G20 should leverage the collected data to bolster the global supply network's resilience to climate change. This effort includes better planning for adaptation and mitigation strategies, in particular, for critical and essential goods and services.

“The policy brief emphasises the critical need for the G20 to spearhead efforts in overcoming the current lack of granular supply chain data. By doing so, countries can enhance their economic planning, foster resilience, and ensure a smoother transition to a sustainable and climate-resilient economy”, says Mathilde Bossut, researcher at the Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance.

The policy brief is a collaborative effort by experts from Frankfurt School of Finance & Management, Complexity Science Hub Vienna, Vienna University of Economics and Business, DIW Berlin, and ETH Chair of Weather and Climate Risks.

Please find more information and the full policy brief here.