By Abbas Nazil
Economic models used by governments, regulators and investors are failing to capture the true scale of climate change impacts, prompting calls from climate scientists for a move beyond traditional GDP-based assessments.
A new survey conducted by researchers from the University of Exeter, the Carbon Tracker Initiative and Aurora Trust found that commonly used economic frameworks significantly understate the long-term damage caused by rising global temperatures.
According to the study, many climate stress tests and financial risk scenarios rely heavily on average global temperature increases and gross domestic product projections, which scientists argue do not reflect the complex and compounding realities of climate disruption.
The report revealed strong agreement among climate experts that standard economic models underestimate climate risks, particularly because they use linear assumptions that do not align with observed scientific evidence.
Researchers warned that these simplified approaches ignore tipping points, irreversible climate events that can rapidly worsen environmental and economic conditions beyond manageable limits.
Previous studies have also criticized climate economists for failing to incorporate such tipping points, a gap acknowledged even by the Network for Greening the Financial System, which noted that its scenarios may underestimate long-term damage.
Lead researcher Jesse Abrams of the University of Exeter cautioned that relying on flawed models could lead to dangerous policy and investment decisions that leave societies unprepared for escalating climate risks.
He stressed that waiting for perfect models is unrealistic and that decision-makers must begin adjusting how they assess climate-related financial and economic threats.
Experts involved in the study highlighted that GDP alone does not account for critical factors such as mortality, inequality, cultural loss, environmental destruction and the erosion of wellbeing.
They explained that GDP often records spending on disaster recovery as economic activity, even though it reflects loss rather than genuine growth.
The survey also found that using global average temperatures hides regional climate impacts, potentially overlooking severe disruptions to supply chains, food systems and financial stability.
Respondents recommended expanding climate indicators to include rainfall patterns, sea-level rise, humidity and the frequency of extreme weather events.
They also urged economists to pay closer attention to worst-case scenarios instead of relying on average projections that may mask severe outcomes.
Sophie Heald of Ortec Finance noted that while existing climate scenarios provide a starting point, they are often applied incorrectly without factoring in deeper uncertainties and compounding risks.
The report called for stronger collaboration between climate scientists, economists and financial institutions to develop more realistic and resilient economic planning tools.
Researchers hope to expand the project through workshops and broader global participation, particularly involving experts from developing regions most vulnerable to climate impacts.
They described proactive risk identification and adaptation measures as essential to protect economies and financial systems from escalating climate disruption.
