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.
£131bn
of gross domestic product in 279 of the world’s leading cities is exposed to direct climate-driven risks
Source: Cambridge University Centre for Risk Studies’ 2019 estimate
For public and commercial organisations, 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.
Circle depicting the following: physical damage to public and private sector assets, change in resource prices, changes in demand for products/services, impact on pensions, emergency response cost, geopolitical transition risks, humanitarian loss, increasing costs of commercial operations, supply chain disruptions, loss productivity, reduced financial investment and economic loss, and climate change litigation
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:
Assessment and quantification in the short and long term
Transition and resilience planning
Financial reporting and disclosure
Investment strategy and implementation
Capital management
Risk hedging and transfer
Health/demography
Human capital: talent, rewards and culture alignment; non-executive director responsibilities; pensions management; corporate governance.
Unpredictable times require bold thinking, and our world-class analytic consulting group challenges norms and is dedicated to improving client outcomes.
Institutional investors require portfolios that are tailored to their goals, cost-effective and deliver strong returns with controlled risk. As a company with multi-asset capability and a fiduciary mindset, our investment professionals can help our clients to invest optimally, with a wider mission to change the way the investment industry operates.
The world of risk, capital and investment is becoming more complex every day. Less pronounced rating cycles, alternative capital sources, consolidation pressures, and shifting markets in classes such as cyber, casualty, life and health – these are just some of the factors affecting the market today. In Willis Re you have a reinsurance advisor, with a nearly 200 year pedigree, that embraces and overcomes complexity.
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.
Related site
Thinking Ahead Institute
The Thinking Ahead Institute aims to ‘change investment for the better’.
