Climate Risk and Resilience

The global challenge of achieving an orderly transition to a low carbon, climate resilient economy increasingly dictates that climate considerations are an integral part of mainstream financial decision making across the public and private sectors.

The climate conversation has rapidly shifted and continues to do so. Investors are demanding climate disclosure, central banks are working together to ‘green the financial system’ and expectations of employees and customers alike are becoming ever more demanding. The need to manage climate risk and support an orderly transition to a low carbon, resilient economy is no longer a matter of conscience, but a strategic and financial imperative.

With our combined expertise helping clients manage people, capital and risk, Willis Towers Watson is supporting organisations around the world to better understand the physical, transition and liability risks from climate change, build resilience and capture the opportunities presented by the low carbon transition.

Climate Quantified™ brings together our deep weather and climate analytical experience from the (re)insurance and investment markets, our extensive academic, research and institutional investor relationships, and our multi-discipline expertise and capabilities in a fully integrated service offering.

Nor are we simply a service provider; Climate Quantified embodies a proactive approach to helping shape the global community’s response to climate risks through our own and cooperative initiatives. These include:

• Our leadership role in efforts to address the insurance protection gap in many developing countries, including creation of the Insurance Development Forum
• Being a signatory to the Principles for Responsible Investment and the Principles for Sustainable Insurance
• Our contributions to work on climate stress testing for disclosures
• Our $50 million investment in the award winning Willis Research Network over the last decade to support open climate and natural hazard research in partnership with institutions such as the National Center for Atmospheric Research, Columbia University, the National University of Singapore, and Newcastle, Cambridge and Exeter universities in the UK
• The work our Climate and Resilience Hub has done and is doing with policy makers, non-governmental organizations and financial institutions to promote resilience to climate-related events
• Our creation of the Thinking Ahead Institute that aims to influence change in the investment world
• Our founding with the World Economic Forum of the Coalition for Climate Resilient Investment, which aims to improve the pricing of climate risks and climate resilience in investment decision-making

The drive for climate action

Dealing with climate change is a responsibility we all share – we believe we all are the ‘they’ who must act. As such, our clients, colleagues and other stakeholders expect us to conduct business with integrity, in an environmentally and socially responsible manner and with the highest ethical standards. This is reflected in our commitment to ESG.

For public and commercial organisations, further specific impetus and motivations for action come from numerous sources, including: legal, liability and regulatory; financial; the need to build asset and infrastructure resilience; corporate responsibility; and reputational impact.

Reflecting this diversity of drivers, climate risk is truly multi-dimensional. The potential consequences vary from physical and economic impacts to liability risks and risk arising from the pace of transition to a low carbon economy.

Climate risks create impacts at macro and micro levels

To respond effectively, organisations will need to adapt their management of climate risks in several areas, such as:

1. Assessment and quantification in the short and long term
2. Transition and resilience planning
3. Financial reporting and disclosure
4. Investment strategy and implementation
5. Capital management
6. Risk hedging and transfer
7. Health/demography
8. Human capital: talent, rewards and culture alignment; non-executive director responsibilities; pensions management; corporate governance.

How Willis Towers Watson can help

Willis Towers Watson's Climate Quantified^TM approach helps organizations to quantify how they will be affected by, and can affect, the climate change trajectory through mitigation measures and by building climate adequate and resilient solutions.

The extra value we bring comes from recognition of the interplay of data and sophisticated analytics with law, regulation and policy, and how these factors impact the allocation of capital.

Specific service offerings that underpin Climate Quantified include:

• Insights in to the rapidly evolving policy and investor landscape
• Risk and scenario modelling using the latest science
• Climate risk audits and stress testing
• Risk transfer and financing solutions – broking and insurance product development, reinsurance and insurance-linked securities.
• Asset analysis based on environmental, social and governance (ESG) principles and the development of more sustainable, climate resilient portfolios
• Analytical support for climate-related financial reporting and regulatory requirements
• Developing talent and rewards strategies to support organizational objectives related to climate

Our heritage, skills and connections across markets support our focus on helping organisations navigate climate risk and implement an orderly transition, seize opportunities from the changing world and optimise value in the years and decades to come.

Climate Quantified in action

• We assess natural catastrophe risks for hundreds of (re)insurers worldwide.
• We are the leading reinsurance broker for the world’s largest multi-sovereign parametric natural catastrophe emergency response programs.
• We have worked with a major UK land developer to improve its knowledge of physical and transition risk, and to manage its operational resilience and investment strategy across the business.
• In collaboration with top academic institutions, we are supporting governments in their efforts to enhance national investment decision-making, by allowing them to prioritise specific areas and sections of their infrastructure networks based on the exposure of social and economic value to climate risks.
• Willis Towers Watson Securities is a leading arranger of catastrophe bonds.
• Working with one of the largest financial institutions in the world, we have assessed the exposure of its real asset portfolios to climate risks, resulting in a series of follow-up phases aimed at reshaping internal decision-making based on our climate analytics.
• We supported a large bank to understand its climate risk exposure on a large rail infrastructure project. This engagement focused on physical risks to assets and anticipated downtime following damage as part of creating a common asset resilience language.
• We advise on insurance policies for coral reefs and other marine and terrestrial natural capital via our Global Ecosystems Resilience Facility.