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What can the public and private sectors do in practice to drive innovation in blue finance and deliver ocean resilience?

UK & Ocean Risk and Resilience Action Alliance Blue Finance Roundtable: Mobilising finance for ocean resilience and tackling climate risk

Climate|ESG and Sustainability
Climate Risk and Resilience

By John Haley | November 5, 2021

John Haley, Willis Towers Watson CEO and Coalition for Climate Resilient Investment Chair, participated in the "UK & Ocean Risk and Resilience Action Alliance Blue Finance Roundtable: Mobilising finance for ocean resilience and tackling climate risk" on 5 November.
John Haley, Willis Towers Watson CEO and Coalition for Climate Resilient Investment Chair, addressing the UK and Ocean Risk and Resilience Action Alliance Blue Finance Roundtable at COP26 on 5 November.
John Haley addressing the "UK & Ocean Risk and Resilience Action Alliance Blue Finance Roundtable" at COP26 on 5 November.

Copyright: phillwilliams/theoceanrace

Your Excellencies, Ladies and Gentlemen

My thanks to Lord Goldsmith and the UK Government, ORRAA and Ulrike and the AXA team for the invitation to this roundtable and your sustained leadership on ocean risk and finance over many years, a passion we share. I remember launching our Global Ecosystem Resilience Facility at the World Ocean Summit in 2018 and it’s remarkable to see how far things have come in that time, much of it in collaboration with Karen Sack and AXA.

To confront the climate emergency, we must redirect the invisible hand to guide finance towards a resilient and prosperous future on both land and sea."

On Finance Day at the Resilience Ministerial , I referenced the Scottish philosopher Adam Smith, who published The Wealth of Nations in 1776. In this work, Smith laid the foundations for modern economics, and described the invisible hand that shapes our lives and our world. To confront the climate emergency, we must redirect the invisible hand to guide finance towards a resilient and prosperous future on both land and sea.

There have been promising public-private innovations over the past three years, and now we must scale them to deliver the structural changes that are needed. Before I get into examples, let me show their wider potential by framing them within the ongoing transformation of global finance and regulation, which is essential in creating the economic rationale for public-private partnerships to be mainstreamed at the scale required.

As institutions increasingly disclose their climate related risks, dependencies on natural assets become illuminated. The disclosure of ocean and coastal risk can help identify the economic dependency. This higher level of understanding of the economic interest in natural assets, such as coral reefs, is a game changer. It may seem ironic, but in a world of climate disclosure the most significant impact of natural asset values will likely be through the liability side of corporate balance sheets, including firms operating far from the coast.

It’s important to understand that with insurance, you don’t have to own an asset to have an insurable interest. And in order to reduce premiums, you take steps to lower risk – think about fire insurance, where you may install smoke alarms. Or for example with a great work of art. It’s not replaceable if destroyed – but we can insure against the economic value for it and do things to protect it, lowering the risk.

Back to the coral reef example, if the health of the coral reef impacts industries such as fishing or tourism, then in order to reduce the risk of coral reef degradation, companies are motivated to work to prevent the degradation. In this way environmental stewardship is delivered through financial risk management. The invisible hand is redirected…

One other transformation to mention here is that of data and analytics. The innovation in this space is creating a revolution in risk financing through parametric instruments and other novel applications of insurance tools, particularly linked to earth observation data.

The innovation in the data and analytics space is creating a revolution in risk financing through parametric instruments and other novel applications of insurance tools, particularly linked to earth observation data."

We are putting these attributes to use around the world with public and private partners. In Fiji and Papua New Guinea we are working with WWF to increase the adaptation capacity and resilience of coastal fishing communities with funding from the Global Environment Facility; in the Philippines we are working with Conservation International and with Rare on innovations bringing insurance tools and solutions to bear on key risk management and conservation problems, and earlier this year we implemented the multi-national insurance of the Meso-American Reef off Central America with the Mesoamerican Reef Fund, supported by the InsuResilience Solutions Fund. We are delighted that this program is due to be extended in the Caribbean with the support of UK Government’s Blue Planet Fund through ORRAA.

Of course, developed economies need ocean and coastal risk protection too. We have worked with The Nature Conservancy to test various approaches to insuring reefs in Hawaii and Florida against not only hurricanes, but also coral bleaching and sedimentation after extreme rainfall events, building on ideas developed during the Pacific Ocean Finance Program and with many partners across the Global South. This is a two-way process.

So now we are ready to mobilize public private partnerships at scale. CoP26, the #backblue initiative and UK’s Blue Planet Fund provide powerful momentum. We are particularly excited about the Sea Change Impact Financing Facility (or SCIFF) that is the strategic platform that we have been looking for to scale up our work.

I am delighted to announce today that we intend to deepen our partnership and commitment to ORRAA and play a leading role in the development and implementation of SCIFF, already in process. We will work with ORRAA and other partners to focus on building out these exciting insurance-related dimensions of the SCIFF, but we won’t stop there – our approach to thinking about risk and resilience applies across financial institutions, with insurance-led thinking on ocean risk analytics forming the basis of our work in the Coalition for Climate Resilient Investment to steer the economics of infrastructure.

With this, we will redirect the invisible hand, to steward our Oceans and protect our lives and livelihoods. We’ll deliver part of a new economic order, protecting the wealth of nations for the climate decades ahead.

Thank you.

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