This report examines the risks and opportunities the Arctic offers.
Rapid and disruptive change in the Arctic environment presents uneven prospects for investment and economic development
Environmental changes, especially those linked to global climate change, are giving rise to a broad set of economic and political developments. Sustainable realisation of the economic opportunities that result from these developments depends on strong regulatory frameworks and corporate environmental stewardship.
The Arctic is likely to attract substantial investment over the coming decade, potentially reaching $100bn or more
There is a wide range of potential scenarios for the Arctic’s economic future, depending principally on local investment conditions and global commodity prices. Oil and gas, mining and the shipping industries will be the biggest drivers and beneficiaries of Arctic economic development.
Significant knowledge gaps across the Arctic need to be closed urgently
Uncertainties and knowledge gaps exist around the nature of environmental change, the geological potential of the Arctic and environmental baselines, as well as seabed mapping, and how to deal with the risks of significant Arctic industrial activity. Governments, research institutes, non-governmental organisations and businesses can help close these gaps.
Arctic conditions will remain challenging and often unpredictable
Many of the operational risks to Arctic economic development – particularly oil and gas developments, and shipping – amplify one another. At the same time, the resilience of the Arctic’s ecosystems to withstand risk events is weak, and political and corporate sensitivity to a disaster is high.
The environmental consequences of disasters in the Arctic are likely to be worse than in other regions
While particular risk events – such as an oil-spill – are not necessarily more likely in the Arctic than in other extreme environments, the potential environmental consequences, difficulty and cost of clean-up may be significantly greater, with implications for governments, businesses and the insurance industry.
The politics of Arctic economic development are controversial and fluid
Given the Arctic’s iconic status and sensitive environment, Arctic development is often politically contentious, with sometimes opposing interests and perspectives between local, national and international levels.
Governance frameworks in the Arctic should continue to develop in their current direction and be reinforced where possible
There are major differences between regulatory regimes, standards and governance capacity across the Arctic states. The challenges of Arctic development demand coordinated responses where viable, common standards where possible, transparency and best practice across the north.
Risk management is fundamental for companies to work safely, sustainably and successfully in the Arctic
Companies operating in the Arctic require robust risk management frameworks and processes that adopt best practice and contain worst case scenarios, crisis response plans and full-scale exercises. There are many practical steps businesses can take to manage risks effectively, including investing in Arctic-specific technologies as well as transferring some of the risks to specialist insurers.