The climate greatly affects the food industry. The prices of olive oil, potato and coffee are rising because of the changes in weather conditions. Extreme weather events, which are becoming increasingly frequent, have a significant impact on harvests and supply chains. All this gives rise to projections that food prices may drive inflation even higher in some regions of the world.

Rising food prices because of climate change and the costs of the green transition will spur inflation in the years to come, Nicolai Tangen, the head of Norges Bank Investment Management, that manages Norway’s oil fund. The global economy is experiencing a climate-driven inflation, Mr Tangen told Financial Times.

The climate primarily impacts the food industry. For example, the prices of olive oil, potatoes and coffee and fruits rise because of changes in weather conditions. The increasingly frequent extreme weather events have a significant impact on harvests and supply chains. All this forecasts that food prices may drive inflation even higher in some regions of the world.

A hefty price tag for the green energy transition and a reversal of globalisation are also part of the mosaic, Mr Tangen said, adding that he is also seeing signs of the so-called „greedflation.”

Not only are companies passing on their increased costs to consumers, but they are also ever more frequently seizing the opportunity to raise prices significantly beyond their additional costs. As a result, consumers are essentially paying much more due to a compounded increase.

Investors are also encountering a narrow window of opportunity, as prices and interest rates continue to be high while expected returns fall short of projections. Under these circumstances, significantly fewer individuals choose to invest.

Companies are already aware of the problem, shows a recent survey of more than 4,400 CEOs from around the world, conducted by accounting and consulting firm PwC. However, they have so far failed to find an adequate solution. A majority of company leaders expect to see anywhere from a “moderate” to “very large” impact on costs due to climate change within the next year, with around 50 per cent expecting „moderate”, „high” or even „very high” impacts, the survey reveals.

Numerous asset funds have been cautioning about this phenomenon and the impact of climate change on inflation for years. Independent experts have also consistently highlighted the looming threat. British economist Charles Goodhart warned of enduringly higher inflation as early as February 2021, citing factors such as decreasing globalisation, an aging population, and the expensive battle against climate change.