Global Construction Industry Facing Climate Change Challenges and Opportunities: Marsh

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According to a report by Marsh and Guy Carpenter, subsidiaries of Marsh McLennan, climate change and the race for net zero greenhouse gas emissions (net zero) are arguably the biggest challenges facing the construction industry. faced – but will generate new opportunities.

The infrastructure boom is expected to fuel global economic growth over the next decade, with global construction output expected to increase 6.6% in 2021 and 42% by 2030, largely thanks to government incentives and demand for residential construction, according to the report. titled “The Future of Construction: A Global Prediction for Construction to 2030”.

The global construction market is expected to grow by US $ 4.5 trillion over the decade through 2030 to reach US $ 15.2 trillion, according to the report, noting that only four countries – China, India, the United States and Indonesia – will account for almost 60% of this market. growth. At the same time, the world’s top 10 construction markets are expected to account for nearly 70% of growth over the same period.

Although the near-term outlook for the global economy remains clouded by soaring inflation, supply chain bottlenecks and the Delta variant, the global construction industry is expected to lead the economic recovery. global after the pandemic in the medium term and is expected to grow faster than the manufacturing or service sectors, according to the report, prepared with Oxford Economics.

However, as the sector grows, the risk of pollution and waste also increases, the report warned, explaining that construction and the wider built environment currently account for around 40% of global greenhouse gas emissions. tight. (Editor’s Note: A representative from Marsh explained that “the built environment at large” refers to the construction supply chain – the inputs and outputs associated with construction projects.)

During the global transition to net zero, industry must radically reduce the amount of carbon embedded in new construction, infrastructure and buildings, which is already a “huge challenge”.

“An emerging deconstruction industry that will reuse huge existing urban stocks of building materials could reduce
carbon in the construction of new buildings and infrastructure, ”continues the Marsh report.

In addition, the climate crisis is driving huge demand for decarbonizing energy networks and developing renewable energy, according to the report, citing Saudi Arabia’s Giga projects, which are leading net zero initiatives.

“Sustainable and quality infrastructure is an engine of economic growth and social progress and helps to achieve the Sustainable Development Goals (SDGs) and the commitments of the Paris Agreement.

Moreover, it continued, the environmental, social and governance (ESG) capital for infrastructure grew by 28% in 2020, which was largely due to a fundraising flow in strategies related to sustainable development. “Since significant capital is typically allocated to infrastructure by large construction companies and developers using their own corporate balance sheets, opportunities exist 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 will face over the next decade. These forces are changing the risk profiles of the industry, ”said Richard Gurney, global construction manager, Marsh Specialty, in a statement.

“Organizations must adapt in order to harness the enormous growth potential of the sector while playing a central role in advancing economies and communities around the world,” he said.

“The construction and engineering industry is entering a period of exciting opportunities, but also a period that will require new ways of approaching risk by the insurance and reinsurance sectors,” said Simon Liley, Global Engineering Co-Manager at Guy Carpenter.

“These dynamics require effective knowledge sharing between industry innovators on the one hand and reinsurance actuaries on the other,” noted Liley. “Understanding the changing profile of exposure, technology and sources of capital will be important in enabling insurers and reinsurers to establish underwriting platforms and offer products that meet the changing needs of the insurance industry. construction ”.

Other Marsh / Carpenter projections for the industry through 2030 include:

  • Average annual construction growth forecast of 3.6% per year – faster than service or manufacturing sectors.
  • The next decade for construction will see global growth increase by 35% over the previous decade, driven by unprecedented levels of stimulus spending in infrastructure and the release of excess household savings; it will represent more than 10% of the GDP in North America.
  • Global infrastructure construction is expected to grow at an annual average of 5.1%.
  • UK infrastructure annual growth is expected to average 3.7%, rivaling China over the period, with UK megaprojects providing increased growth.
  • Urbanization is expected to stimulate growth in emerging markets. Global population growth could add an additional 2.5 billion people to urban areas by 2050, nearly 90% of which will occur in Asia and Africa.

“It is unusual for construction to outpace growth in services and manufacturing over a more sustained period. We would normally expect to see construction grow faster than other sectors of the economy for shorter periods in a cyclical recovery, ”said Graham Robinson, global head of infrastructure and construction at Oxford Economics and author principal of “Future of Construction”.

“However, it’s no surprise that construction is expected to fuel the global economy over the next decade, given the unprecedented nature of government stimulus spending on infrastructure and the rampage of excess savings. households as a result of COVID, “said Robinson.

Source: Marais

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