The Importance of Long-Term Climate and ESG Responses and Regional Cooperation: The Current State and Future of the World as Revealed by the Global Risks Report 2026

Global Sustainability Standards Board (GSSB) Board Member
GHG Protocol Technical Working Group (TWG) Members
Director of Zeroboard Research Institute Tomoo Machiba

The World Economic Forum (WEF) Annual Meeting, which featured notable appearances by U.S. President Donald Trump and Tesla CEO Elon Musk, has concluded. The 2026 edition of the Global Risks Report, published annually by the WEF before the so-called "Davos Forum," ranked the global turmoil that has unfolded in the year since President Donald Trump took office as the top short-term risk, describing it as a geoeconomic conflict that goes beyond geopolitics. The report concluded that this is not a one-off crisis, but rather a "world where instability has become the norm." *1

On the other hand, what caught my attention about the 2026 edition is that there is now a shared recognition that the three destabilizing factors - the global economy, geopolitics, and climate change - are not individual risks, but rather that they are simultaneously progressing and mutually influencing each other. In this article, I would like to interpret the key points of the Global Risks Report from the perspective of climate change and ESG, and consider what it means for Japan, which is prone to being swayed by short-term crises but is looking ahead to long-term structural changes, in the context of policy, management, and regional strategy.

Climate risks recede into the background in the short term

The WEF Global Risks Report annually outlines the major risks facing the world over the short term (present to two years), medium term (up to five years), and long term (up to ten years). It surveys more than 1,300 experts in government, business, finance, and academia, and takes into account the input of over 11,000 business leaders from 116 countries. It serves as a mirror that reflects the common understanding of the world's future as viewed by decision-makers around the world.

In the ranking of short-term risks, "geoeconomic conflict" rose to the top, rising from the previous year and the year before. What is notable this time is that "misinformation and false information" and "social division" also ranked highly among the short-term risks. In Japan as well, there has recently been a proliferation of mixed information and extremely divided opinions, particularly on social media, which poses a direct risk of undermining the "trust" that is the basis for political decision-making and economic markets *2) .

Meanwhile, short-term environmental risks have receded into the background, with "extreme weather," ranked second last year, dropping to fifth and "pollution," ranked sixth, dropping to ninth (Figure 1). Risks such as geoeconomic conflict, armed conflict, and information fragmentation are leading to supply chain disruptions, rising Energy prices, and sudden changes in the regulatory environment, including tariffs, forcing companies to respond in the short term. This has led to a relatively low perception of the urgency of climate change. The United States' decision to withdraw from not only the Paris Agreement but also the United Nations Framework Convention on Climate Change (UNFCCC) itself, and the European Union's ambitions have stalled, further exacerbating the uncertainty surrounding countries' decarbonization efforts. However, experts say this is not necessarily a denial of climate change, but rather a postponement due to a shift in attention. *3)

Figure 1: Top short-term (up to two years) risks in the Global Risks Report 2025 and 2026
Source: WEF, The Global Risks Report 2025 *4) and 2026 *1) Create by Zeroboard

Long-term environmental risks are compound crises

Environmental risks continue to dominate the list of long-term risks over a 10-year span. While the rankings of "extreme weather," "biodiversity loss," and "irreversible change to the Earth system" change, they always rank among the top risks *1) . In contrast to the shift in the center of gravity of short-term risks toward geoeconomic conflicts and information risks, climate change remains the "greatest threat" in the long term.

The report emphasizes the concept of "polycrisis," which refers to a situation in which multiple crises occur simultaneously and interact with each other, increasing overall unpredictability and destructive power. The report argues that extreme weather events can destabilize agricultural production, leading to soaring food prices, which in turn can cause social and political unrest, strain national finances, and ultimately delay public investment and climate change measures. This chain reaction can increase vulnerability in an irreversible way.

In other words, climate change is no longer seen as a single environmental risk, but as a structural factor amplifying other risks. Climate change has cross-cutting impacts on areas such as uncertainty about economic growth, imbalances between countries and regions, social divisions, and the stability of fiscal and financial systems. Intensifying floods, droughts, heat waves, and typhoons are already undermining the very foundations of economic activity around the world. The Indian think tank Policy Circle has commented that "climate shocks are no longer exceptional events but have become variables embedded in the economic system." *3) For companies, as required by climate risk disclosure based on financial materiality, such as IFRS S and SSBJ standards, an increase in extreme weather events in the near future will not only pose operational risks, but will also directly affect cash flow and capital costs in the form of unstable raw material procurement, disruptions to logistics networks, declines in labor productivity, and higher insurance premiums and stricter underwriting conditions.

Figure 2: Top long-term (up to 10 years) risks in the Global Risks Report 2025 and 2026
Source: WEF, The Global Risks Report 2025 *4) and 2026 *1) Create by Zeroboard

The WEF report also describes biodiversity loss as a "risk that erodes the very foundations of economic activity ." *1) Although many Industry , including agriculture, fisheries, pharmaceuticals, and the chemical Industry , depend on ecosystem Service, their value has not been adequately evaluated in the market. From the perspective of multiple crises, biodiversity loss is linked to food instability, regional conflicts, and migration and refugee issues, and is a factor that further increases geopolitical risks.

Even more important is the impact on national finances and the insurance and financial systems. Zurich Insurance and Marsh have emphasized the impact that frequent extreme weather disasters will have on the insurance and reinsurance markets, pointing out that we are already seeing a sharp rise in insurance premiums, stricter underwriting conditions, and even the suspension of insurance in some regions. *5) If insurance cannot be provided, it means that investment and lending cannot be provided, which will ultimately destabilize national finances and the stability of the entire financial system.

ESG in a time of "permanent division"

ESG is no longer just a matter of institutional responses and evaluation indicators, but is being redefined as an Issue deeply connected to the very structure of trust in society. The report uses the phrase "persistent fragmentation," recognizing throughout that the current geoeconomic crisis is not temporary, but that division and instability are becoming prerequisites for the world. In a world where division has become the norm, ESG principles such as decarbonization and respect for human rights are less likely to be shared as self-evident good, and questions are being asked more rigorously than ever about who benefits from them and what burdens they impose on whom.

Under persistent divisions, the narrative that "everyone benefits in the long run," which has underpinned ESG, becomes less effective. As is being debated among citizens in Europe and Japan, amid rising Energy prices and continuing inflationary pressures, decarbonization investments and environmental regulations tend to be perceived as a burden on current lifestyles and competitiveness, rather than investments in the future. Furthermore, in an information environment where misinformation and disinformation are widespread, the directions and data presented by companies and governments are viewed with suspicion, making it difficult to reach a social consensus. With differing positions and interests coexisting, the issue is evolving into a process of exploring the extent to which legitimacy and persuasion can be enhanced and the extent to which cooperation can be achieved.

Overcoming uncertainty through cooperation with Asia

For Japan, a country that relies heavily on overseas sources of Energy and resources and is at high risk of natural disasters, climate change is not just an area of ​​environmental policy; it is an issue that is directly linked to Industry competitiveness, social stability, and even the very sustainability of the country. As geo-economic conflicts intensify, balancing Energy security, securing scarce resources, and decarbonization is an unavoidable management Issue for Japanese companies.

In a climate of perpetual division, it is no longer realistic to act on the premise of comprehensive agreements or international cooperation. Attempting to reach a complete agreement on climate change and ESG issues among countries with vastly different values, political systems, and economic interests will prolong negotiations, increasing the risk of delayed response. In other words, we must design strategies that take uncertainty into account, rather than simply waiting for the external environment to improve.

For this reason, I believe it will be important for Japan to narrow down its fields and themes and build practical cooperation in areas where interests partially coincide. Decarbonization and Energy transition in Asia, which is deeply connected to the supply chains and markets of Japanese companies, could be at the center of this. Japan's role in Asia's emission amount data and product energy efficiency standards, ensuring the reliability of transition finance, and practical technology transfer and human resource development.

This will enable climate change measures to be transformed from idealism into a "system that works." For Japan, achieving concrete results will not only foster trust in the region and maintain its international presence, but it will also be a realistic and strategic choice for ensuring the country's Industry competitiveness. There is ample room for Japan to proactively take on similar strategies not only in Asia, but also in Europe, Australia, Canada, and other countries.

Decarbonization and ESG as a realistic solution

At Davos, the speech by Canadian Prime Minister Mark Carney, former Governor of the Bank of England and leader of the establishment of the Task Force on Climate-related Financial Disclosures (TCFD) while serving as Chair of the Financial Stability Board (FSB), attracted even more attention than President Trump. While acknowledging that the "comfortable story" of a rules-based international order naturally restoring itself is over, Carney emphasized that middle powers are still not powerless. He argued that the way to realistically function in a divided world is to forge "variable geometry" coalitions in areas where values ​​and interests overlap. *6)

Climate change and ESG are not constraints imposed from the outside, but strategic Issue that ask how we can protect our Industry competitiveness and social sustainability and pass them on to future generations. Japan, with its economic structure that relies on overseas sources of Energy and resources and is deeply connected to Asia, must accept permanent division as a given and, based on that, determine in what areas, with whom, and in what form cooperation is possible, building on this at the practical level. Decarbonization and ESG are one of the few "common languages" for this purpose, and they need to be repositioned not as ideals but as practical areas for stabilization. We need to design functioning cooperation one by one and accumulate results. Making these steady choices is perhaps the most realistic path for Japan to maintain its independence in uncertain times.

*1) World Economic Forum (WEF), The Global Risks Report 2026, 21st Edition, 14 January 2026. https://www.weforum.org/publications/global-risks-report-2026 

*2) Japan International Research Center for Agricultural Industry(JIRCAS), "Local Trends 1419: Global Risks 2026,"January 19, 2026 https://www.jircas.go.jp/ja/program/proc/blog/20260119

*3) Policy Circle, “Global Risks Report 2026: Economic, climate shocks are converging”, 18 January 2026. https://www.policycircle.org/economy/global-risks-report-2026 

*4) WEF, The Global Risks Report 2025, 20th Edition, 15 January 2025. https://www.weforum.org/publications/global-risks-report-2025 

*5) Marsh Japan, "Global Risks Report 2026: Rapid Arrival of a New Era of Competition Challenges Global Businesses,"January 14, 2026 https://www.marsh.com/jp/ja/about/media/global-risks-2026.html 

*6) TIME, “The Climate and Energy Implication Hidden in Mark Carney’s Davos Speech”, 24 January 2026. https://time.com/7357405/mark-carney-davos-speech-climate-energy