Matt Cullen, Assistant Director, Head of Strategy, ABIYesterday marked the end of Climate Week New York 2015, which brought together influential global figures from across industries, governments and countries to work towards a low carbon world.
After seven years of Climate Week, it continues to grow in prominence and output, with the opening speakers this time including UN Secretary General Ban Ki-Moon, Apple CEO Tim Cook and US Secretary of State John Kerry, and over 150 million social media mentions already. It illustrates the growing public and business appetite for action on climate change, reflected by one of the central announcements of this year’s event – a further nine large multinationals have pledged to secure 100% of their electricity from renewable sources, as part of the RE100 group, which already includes the reinsurer Swiss Re.
This prominence comes to a head this year, as the COP21 conference in Paris this December offers an opportunity to achieve a legally binding and universal agreement on the climate, with the aim of restricting the rise in global temperatures to 2˚C. In the lead-up to this, the ABI will be delivering a series of messages highlighting the positive work already being done by the industry, while also calling for a step change in action, to ensure that any agreement to reduce emissions can be delivered in practice.
The climate is at a dangerous tipping point. If we follow the current trajectory of CO2 emissions - a ‘business as usual’ approach - then we are likely to increase global average temperatures by 4˚C by 2100, with a one-in-ten chance of an increase of 6˚C, leading to catastrophic, irreversible changes in the global climate.
Why is this important to the insurance industry?
- Firstly, insurers are committed to helping their customers manage their risks. Yet climate change increases both uncertainty and the potential impact of climate risks, making their task ever more difficult and costly. These are costs that society will ultimately have to bear, not only in the potential increase in premiums that customers may face for products such as buildings insurance, but also in the form of the increased threat to supply-chains that are often located in areas which are incredibly sensitive to any change in temperature.
- Secondly, the UK insurance sector is responsible for investments of £1.8 trillion, equivalent to 25% of the UK’s net total worth. These are assets managed for the future, largely to provide for the retirement of customers. Short-term gains will ultimately prove insignificant if climate change is ignored. As recent research by the Economist Intelligence Unit shows, when considered from the long-term point of view of a government, a rise in temperature of 6˚C could, result in losses for global assets of $43trn by 2100 – or 30% of the world’s entire stock of managed assets.
In the face of such a systemic challenge, insurance and savings providers must provide stability, security and leadership by doing two things:
- Have a stronger, louder voice in calling for robust action from governments to mitigate, and adapt to, climate change at all levels. Industry leadership groups such as ClimateWise are already leading the way in this area, but cannot plough this furrow alone.
- Play their part in combatting climate change, as experts in assessing risk, as insurers of low carbon products, and as large institutional investors.
The ABI has a role to play to inspire both the Government and others within the sector to do more. The future sustainability of the insurance industry, the global economy, and indeed society, depend on the actions we take today.
Matt Cullen is Assistant Director, Head of Strategy at the Association of British Insurers (ABI)