There can be no doubt that meeting the activist fuelled climate agenda will be a huge challenge for insurers in the 2020s. Not just in terms of reporting, strategy and offering particular policy T&Cs to carbon-related sectors, or fossil fuel products like gas boilers, cars, ships or motorcycles, but gathering all the right data required to tick the right regulatory boxes. The pressure to NOT insure certain people, companies or even countries will be severe, make no mistake. Here’s some insights from WTW;
The availability of data is the single greatest test firms expect to face over the next five years in order to address climate risk, according to a survey of leading financial institutions by Willis Towers Watson. In addition to 80% of respondents reporting data as their top concern in the transition to a Net Zero economy, difficulty in making quantitative assessments (75%) and insufficient expertise in the actions required (62%) were
also revealed as major challenges.
Conducted as part of Willis Towers Watson’s Climate Risk and Financial Stewardship Summit, the survey polled 122 organisations including global banks, insurers, wealth and asset managers to gain fresh insights on progress made to assess and manage the impact of climate risk on their business. Looking across the same five-year timeframe, few organisations who took part in the survey expect the level of risk associated with climate change to diminish, with more respondents (40%) predicting today’s level of risk facing their business will escalate over time.
With the pace of change far behind what is needed to keep global temperatures from exceeding 1.5°C of pre-industrial levels, survey respondents said that implementing a strategy to achieve Net Zero is the most common challenge to making this commitment (43%), followed by a lack of tools or data (32%). In addition to future climate-related challenges facing the financial sector over the next five years, the survey looked at issues senior decision makers are having to deal with right now.
Respondents cited transition (75%), reputational (63%) and social responsibility (57%) risks their organisations are prioritising today in order to bridge the gap and achieve Net Zero emissions.
Rowan Douglas, Head of Willis Towers Watson’s Climate and Resilience Hub, said: “Future climate risks are unprecedented and systemic, and the magnitude of the challenge is so huge and the moment so late that every lever is being explored to turn economies to meet the Paris targets. While the financial sector is well placed to take a lead, climate-related risk not only needs to be integrated into day-to-day risk management but also to steer the whole economic transition to a low-carbon and resilient future.”
Douglas added: “We are seeing an evolution in what Net Zero finance means for the financial sector and its stewardship role in a whole economy transition towards a climate resilient future. Meanwhile pressure from ambitious new climate targets and scrutiny from central banks, regulators, investors and the wider public continues to increase. To continue to thrive, financial institutions will need to adapt and align their portfolios with a Net Zero carbon world.”