Contributor: Will Bugler
Global insurance giant Zurich, one of the world’s largest companies, has published its updated position on climate change. The view of large insurance companies on the potential impact of climate change is particularly important, as they employ sophisticated models to assess the future risks from climate impacts. In short, it’s their dollar on the line. So what can we learn from Zurich’s view on climate risk? Here are my six takeaways:
- The scale of climate risk is huge: Even with Zurich’s considerable resources and experience of risk analysis, they find climate change to be a tricky problem to pin down. In fact, they call climate change “perhaps the most complex risk facing society today.” The company knows that the risk to its business is potentially enormous, and the risk management solutions require considerable investment.
- We will likely overshoot 2˚C: Zurich is not confident that the world will meet the 2˚C temperature target, let alone the more ambition 1.5˚C goal. Their analysis finds that “the likelihood of missing the Paris Agreement’s target of limiting global warming to 2ºC or below is higher than achieving it.”
- Insurers will put pressure on customers and investees to take action: Governments, businesses and individuals can expect insurance firms to increase the pressure on them to take action on climate change mitigation and adaptation. This will be seen in policy pricing decisions and through leveraging influence through their very large investment portfolios.
- Climate regulations will become more stringent: Private companies, with insurance firms in the leading pack, will become increasingly vocal advocates for stronger climate regulations including, carbon pricing, ending fossil fuel subsidies, investing in new technologies, and building climate resilience.
- Fossil fuel divestment is a train that can’t be stopped: Zurich intends to “Disengage and divest from those whose activities are predominantly focused on thermal coal if these companies have no plan to realign their business over time towards a low-carbon future.” This is likely just the start, fossil fuels are on notice.
- Financial disclosure will provide a step change in climate action: The work of the Financial Stability Board’s Taskforce on Climate Change-related Financial Disclosure (FSB-TCFD), led by Bank of England Governor Mark Carney, is paying dividends. The TCFD is developing climate-related financial risk disclosure commitments for companies. Zurich is on board and more will follow. This requirement will lead to a step change in climate action, as companies analyse their climate risk exposure.
Learn more about Zurich’s position on climate change here: https://www.zurich.com/en/corporate-responsibility/climate-change