Climate Change will Impact Booming Construction Industry
The construction industry is facing increasing challenges due to climate change and the effort to reach net-zero greenhouse gas emissions, according to a new report by Marsh and Guy Carpenter, both businesses of Marsh McLennan. The report, Future of Construction: A Global Forecast for 2030, was written with Oxford Economics. It discusses the future of the construction sector as it recovers from the effects of the COVID-19 pandemic, as well as the key drivers shaping the industry’s future over the next decade. Global construction output is expected to grow by 6.6% in 2021 and 42% by 2030, driven by government stimulus and the demand for residential construction, according to the report. However, as the sector grows, so does the risk of greater pollution and waste. “Construction and the wider built environment currently accounts for around 40% of the world’s global greenhouse gas emissions,” Marsh said. The report said that, "Climate change and the effort to achieve net-zero emissions are arguably the greatest challenges facing the industry. The need to reduce the amount of carbon embedded in new construction will spur the growth of a “deconstruction” industry that reuses existing urban stockpiles of construction materials," the report predicted. "ast year, environmental, social and governance (ESG)-related capital for infrastructure grew 28%, largely thanks to a flow of fundraising into sustainability strategies. Since significant equity is usually allocated to infrastructure by major construction companies and developers using their own corporate balance sheets, there are opportunities for companies that develop new technologies, designs and processes. “Climate change and the ESG agenda – and the risks and opportunities they present – are among the biggest challenges the global construction industry faces over the next decade. These forces are changing risk profiles for the sector. Organisations must adapt in order to harness the sector’s massive potential for growth while playing a pivotal role in the advancement of economies and communities around the world,” said Richard Gurney, global head of construction at Marsh Specialty. “The construction and engineering industry is entering a period of exciting opportunity, but also one that will require new ways of approaching risk by the insurance and reinsurance sectors,” said Simon Liley, co-head of global engineering at Guy Carpenter. The report also made other projections for the industry to 2030. Predicted average annual growth in construction of 3.6% – faster than either the services or manufacturing industries.Global growth in construction for the next decade is up by 35% compared to the previous decade, driven by a record level of stimulus spending on infrastructure and the unleashing of excess household savings. Construction will represent more than 10% of GDP in North America. Global infrastructure construction is predicted to grow by an annual average of 5.1%. Annual growth in UK infrastructure is expected to average 3.7%, rivalling China over the period thanks to UK mega projects. It is not surprising that construction is expected to power the global economy over this next decade, considering the unprecedented nature of the stimulus spending on infrastructure by governments and the unleashing of excess household savings in the wake of COVID.”
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