Global Construction Industry Faces Growing Climate Change and Sustainability Challenges As Economies Move On To Recovery: Report

As the infrastructure boom will fuel global economic growth over the next decade, the construction industry must face mounting pressures related to climate change and the race for net zero greenhouse gas (net zero) emissions, according to a today by Marsh and. Published report by Guy Carpenter, both owned by Marsh McLennan, the world’s leading professional services company in risk, strategy and people.

The report, Future of Building: A Global Forecast for Building Through 2030, authored with Oxford Economics, a global leader in economic forecasting and analysis, provides an outlook on the future of construction as the industry evolves from the unprecedented impact of COVID-19 and the key drivers shaping its future over the next decade, recovered.

According to the report, global construction output is expected to grow by 6.6% in 2021 and by 42% by 2030, mainly driven by government stimulus and housing demand. However, as the sector grows, so does the risk of major pollution and waste, the report warns. The construction industry and the rest of the built environment currently account for around 40% of global greenhouse gas emissions.

According to the report, climate change and the race for net zero are arguably the greatest challenges for the construction industry. The need to radically reduce the amount of carbon embedded in new construction will fuel the growth of a demolition industry that recycles vast urban building materials, the report predicts.

The reports say that in 2020, environmental, social and governance (ESG) related capital for infrastructure increased 28%, largely due to the inflow of fundraising into sustainability-related strategies. Given that large construction companies and developers typically allocate significant equity to infrastructure through their own corporate balance sheets, opportunities exist for companies developing new technologies, designs, and processes.

Richard Gurney, Global Head of Construction, Marsh Specialty commented, “Climate change and the ESG agenda – and the risks and opportunities that come with it – are among the major challenges facing the global construction industry over the next decade. These forces are changing the industry’s risk profiles. Businesses need to adapt to capitalize on the tremendous growth potential of the sector while playing a critical role in the advancement of economies and communities around the world. “

Simon Liley, Co-Head, Global Engineering, Guy Carpenter added, “The construction and engineering industries are entering a period of exciting opportunity, but one that also requires new ways of approaching risk through the insurance and reinsurance sectors. This dynamic requires an effective exchange of knowledge from industry innovators on the one hand to reinsurance actuaries on the other. Understanding the changing profile of exposures, technology and sources of capital will be important so that insurers and reinsurers can set up underwriting platforms and offer products that meet the changing needs of the construction industry. “

Other projections for the industry through 2030 include:

  • Expected average annual growth in the construction industry of 3.6% per year – faster than in the service or manufacturing sector.
  • Over the next decade, global construction will grow 35% than the previous decade, driven by unprecedented stimulus spending on infrastructure and the freeing up of excess household savings. it will account for more than 10% of North America’s GDP.
  • Global infrastructure construction is expected to grow by an annual average of 5.1%.
  • UK infrastructure is expected to average 3.7% annual growth and will compete with China over the period as UK megaprojects add increased growth.

Graham Robinson, Global Infrastructure and Construction Lead at Oxford Economics and lead author of Future of building, said: “It is unusual for construction to outperform growth in both services and manufacturing over an extended period of time. Normally we would expect construction to grow faster than other industries in a cyclical upswing for shorter periods of time. It is not surprising, however, that construction is set to drive the global economy for this next decade, considering governments are spending unprecedented stimulus spending on infrastructure and excess household savings will be released in the wake of COVID. “

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