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Rowan Douglas speaks to BBC World News at COP26

Climate|Willis Research Network
Climate Risk and Resilience|Climate and Resilience Hub

By Rowan Douglas | November 3, 2021

Rowan Douglas, Head of Willis Towers Watson's Climate and Resilience Hub, speaks to BBC World News on the opening day of COP26.
Rowan Douglas speaks to BBC World News at COP26

Rowan Douglas, Head of Willis Towers Watson's Climate and Resilience Hub, speaks to BBC World News on the opening day of COP26.

Watch as Rowan Douglas, Head of Willis Towers Watson’s Climate and Resilience Hub, talks to Annita McVeigh of BBC News at COP26 about the essential role of private sector finance and insurance in combatting the climate emergency.

If the COP in Paris in 2015 is remembered for nation states gathering the political will to tackle global warming, he says that he believes the Glasgow COP will be recognised for a seismic shift in the economic and financial attitudes towards investment in climate resilience and transition – or when morality and economic rationale came together. Increasingly, he notes, financial institutions understand that investing in a high carbon economy that might not be there in 20 years is a bad investment and that, equally, investment in resilience is a good investment. And while the insurance capacity is there to facilitate and underwrite that investment, including in developing economies with high climate vulnerability, the challenge is to make better use of it.

Annita McVeigh: What risks do big multinational companies face if they don't transition to reducing their carbon footprint?

Rowan Douglas: The markets believe the story that Chris Morris has talked about earlier on. They understand what's going to happen physically, they can see the changes now, they can see what’s happening ahead. They can also really believe that we are moving to a low carbon transition. That is what policymakers are clearly driving towards. So I think the developing story we’ll see here in Glasgow is that major financial institutions essentially declare the beginning of the end, the rapid beginning of the end, of the fossil fuel economy and the need for the type of resilience that was spoken about by the Baroness just now and that is a seismic moment. So when we say Paris, everyone just immediately remembers it as the time when the world’s 200 nations agreed on a new direction of travel. I think in 10 years’ time when people just say ‘Glasgow’ it’ll be the moment when people accepted mainstream markets moved in a new direction, partly because of sticks, regulators and others requiring companies to disclose these risks, but also because of carrots, people can see where the future is. I think it’s rather ironic that Adam Smith wrote the Wealth of Nations here in Glasgow and talked about the role of the invisible hand in 1771. Actually we’re updating Adam Smith for the sort of new challenges we face and that’s what Glasgow, I think, will be remembered for. And it’s going to have a massive influence on all markets and all of us.

Annita McVeigh: You talk about carrots and sticks. How much of this has been driven by a market imperative rather than a moral imperative?

Rowan Douglas: It’s interesting. It’s been driven by a moral imperative by many in business from sort of 10 years ago but after Paris there was a switch and you found in companies, no longer if you like just the activists within companies, and there are activists within companies pushing this and coming to events like the COP, now it’s actually marrying a brutal truth that if you invest in assets which are going to crumble that’s a bad investment, if you invest in a fossil fuel economy which will not be there in 20 years’ time, that is a bad investment. And we’re moving towards a situation where to be both moral and economically rational is coming together and that’s very exciting because that moves us into a whole different era.

Annita McVeigh: And that very much ties in with what the Italian PM, Mario Draghi, was saying yesterday on the final day of the G20 in Rome. He was saying “Face the costs now or face a higher cost later.” That is fairly simple economics isn’t it?

Rowan Douglas: It is. It’s a bit like having a medical. We all know that we need to look after ourselves, we all need to have a medical or go to the dentist, but we put it off and broadly speaking our economies, ourselves, we’ve been putting it off this medical and we’ve been getting sicker and sicker and sicker. We are at the chance where we are still fit enough to actually properly get better. If we leave it much longer we’re going to be in the realms of palliative care not actually curing the problem. That’s why these next 10 years, the climate decade, is so important because if we don’t make this change now if we don’t move markets as well as governments we’re going to struggle to make this.

Annita McVeigh: One of the big themes of this COP here in Glasgow is climate justice. We’re talking about the global north, the generally wealthier nations, and the global south, the generally poorer nations, and I just wonder what you’re talking about in this repositioning of markets and multinational and whether that will have more of an impact on people in already developed nations or if it will have a significant impact on those developing countries….. How much will this repositioning of markets will actually help these sorts of places?

Rowan Douglas: Well, actually it will, funnily enough, teams that we’re involved with working in Antigua and Barbados so it’s great to hear the Prime Minister speak. But essentially there are two things that we need to do for particularly exposed small island developing states. One is make sure when we invest in we take into account the risk and the events we expect in the future. It seems incredible to believe that at the moment we generally don’t do that, as investors, we sort of take it for granted so we’ve got to encode the value of risk and resilience so we build for the future. The other key thing is we need to share the risks across populations within the region and beyond. We can do that through building better public and private insurance systems so that when events occur, one, money is distributed automatically to help people recover not waiting months with glorified begging bowls hoping people come back but, critically, if we support these communities through public and private insurance it actually creates governance. It creates rules of activity, a bit like as we drive cars and we have to wear seatbelts, we’re all going to have to obey if you like new rules. If we can marry the rules of good economics with the rules of good behaviour to reduce collective risk and share the excess risk, we need to support those communities in the Caribbean and elsewhere just as we here in Great Britain need support and we do have a risk sharing system we just don’t use it as well as we can and we have to.

Annita McVeigh: On the subject of insurance, whether it’s someone dealing with floods in the UK or a wildfire in California or a bushfire in Australia, do you think the insurance industry is going to adapt sufficiently to make it fit for purpose to provide people with affordable insurance to cover the risks of climate change?

Rowan Douglas: That’s a great point Anita. In fact there’s some great research coming out from the University of Cambridge being released on the 3 November here in Glasgow. And actually sees insurance as much more than just an industry, it sees it as an institution in society. So yes we all need expanded private insurance markets and remarkably don’t realise it when we pay our insurance actually we’re collectively paying into a global pot called resinurance which supports . But increasingly people in exposed locations will need support, they may need subsidies, they may need governments to help make their towns and cities a little more resilient to actually reduce the risk, make insurance viable, that insurance being viable allows investment to flow in because investors know that if disaster strikes debts will be repaid. So we’ve got to marry these things together but insurance broadly defined as the ultimate insurance product. In Britain we call it other things welfare, we call it social insurance. We’re going to have this continuum from the state to the private sector but ultimately it’s all of us as citizens, either as taxpayers or customers, sharing these risks together, locally but also globally.

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Rowan Douglas
Chairman of Willis Research Network

Rowan is Head of the Climate and Resilience Hub (CRH), building on leadership on these themes for over a decade. Previously he served on the Board of Willis Re as CEO Global Analytics and founded the Willis Research Network in 2006. In 2014 he established the Capital Science and Policy Practice to apply Willis Towers Watson's expertise on resilience into wider sectors and support the Company’s growing leadership on climate, resilience and finance which grew into the CRH.

Beyond Willis Towers Watson, he founded the Insurance Development Forum in 2015 with industry, United Nations and World Bank leaders and served on The UK Prime Minister’s Council for Science and Technology 2011-2015. In 2016 he was made CBE for services to the economy through risk, insurance and sustainable growth.


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