“Ethical Markets highly recommends these reports on Sustainable Finance from the Grantham Institute.
~Hazel Henderson, Editor“
August 2019
In this summer round-up Swenja Surminski and Sam Unsworth outline why the insurance industry will need to reset its relationships with customers in the process of extending climate risk disclosure and we have a call for research proposals on central banks and greening the financial system. We also have a major new report assessing the climate performance of 274 of the world’s highest-emitting publicly-listed companies.
Insurers disclosing climate risk need to remember their customers
By Swenja Surminski, Head of Adaptation Research, and Sam Unsworth, Policy Analyst, Grantham Research Institute, LSE.
Climate risk disclosure has advanced rapidly over the last four years, since Governor of the Bank of England Mark Carney highlighted the risks of climate change to the finance and insurance industries in his Tragedy of the Horizon speech. The focus on climate risk disclosure has driven demand for physical climate risk analytics in a range of sectors, spurred on largely by initiatives such as the Taskforce on Climate-related Financial Disclosures (TCFD) and regulators such as the Prudential Regulation Authority, which announced an insurance stress test in June 2019 (PDF). Pressure is also growing from ratings agencies such as Moody’s for insurers to act.Insurance is widely considered to be the sector with the most experience in assessing and managing the physical risks of climate change, such as floods and storms. And indeed the sector has sophisticated models and tools with which to estimate current risk and future losses and that can underpin insurers’ own solvency through more accurate risk analytics. However, to date there is limited evidence to show that these analytics are leading to more climate-resilient investment by insurers. The Asset Owners Disclosure Project (PDF) finds that “Less than 0.5% of assets invested by the world’s 80 largest insurers are in low-carbon investments …, despite the insurance sector being highly exposed to its financial risks”. Nor does purchasing insurance lead automatically to improved resilience to future climate risk.Read more
Extending climate risk disclosure to customers could yield a range of benefits for insurers, customers and the climate, but the industry will need to deepen the relationships that it holds with customers in order to achieve this, write Swenja Surminski and Sam Unsworth in this post for the Sustainable Finance Leadership Series.
Second call for research proposals on central banks, supervision, and greening the financial system
For the second time in 2019, the International Network for Sustainable Financial Policy Insights, Research, and Exchange (INSPIRE) is calling for proposals that investigate priority research questions facing the Network for Greening the Financial System (NGFS), a global network of central banks and supervisors working to “help strengthen the global response required to meet the goals of the Paris Agreement and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development.” INSPIRE seeks to commission best in class research and insights from scholars and analysts from across the world that can inform the work of the NGFS and individual central banks and supervisors.
Research proposals can be submitted via email to [email protected] using this submission form. The submission deadline is 1:00pm BST on 15 September 2019.
New research finds highest-emitting companies off-track to meet Paris climate goals
A major new report assessing the climate performance of 274 of the world’s highest-emitting publicly-listed companies finds that almost half (46%) do not adequately consider climate risk in operational decision-making. A quarter (25%) do not report their own emissions at all, undermining a key recommendation of the Taskforce for Climate-related Financial Disclosure (TCFD).
Download the full report (PDF)
When money speaks the language of justice: investors, banks and the just transition
Nick Robins explores how UK banks and investors are starting to get behind the just transition that is needed for the country to reach its new net-zero target.
Unlocking the strategic economic opportunity of clean and inclusive growth
Patrick Curran, Nick Robins and Nicholas Stern
Chapter in the Banque De France’s Financial Stability Review no. 23 – June 2019. The authors outline the dangers in delaying robust action on climate change and say that flawed economic models of climate choices are underestimating the full costs of climate disruption as well as the benefits of low-carbon innovation. They go on to make the case for a clean and inclusive growth path but stress the importance of mobilising financial policymakers and financial institutions in helping to deliver this.