How the insurance space is tackling climate risk assessment
Risk, identifying, modelling, and managing it, is at the core of what the insurance industry does. And today there is no greater long-term risk than that posed by climate change. This puts the insurance industry centre stage when it comes to taking action on climate change, both through its engagement with clients during the underwriting process and when investing their dollars.
To do this though, like any industry, from banking to legal, there needs to be a framework that helps insurers undertake climate risk assessment. And the best people to do this? The world's leading insurers of course.
That's why the Geneva Association, the only global association of insurance companies, has mobilised experts from 17 of the world's largest P&C and life insurers, representing the companies of its CEO members, to develop climate risk assessment methodologies and tools for the insurance industry.
The task force, which is made up of insurers including Achmea, Aegon, AIG, Allianz, Aviva, AXA, Chubb, Dai-chi Life, Hannover Re, Intact Financial, Manulife Global, MetLife, Munich Re, Prudential Financial, SCOR, Swiss Re, and Tokio Marine, is set to drive innovation in the climate risk assessment space.
Insurers rising to the climate change occasion
According to Jad Ariss, Geneva Associations’ Managing Director, when it comes to global climate action, insurers are “obvious, strong leaders” given their core functions of “managing risk and investing”. And with 17 leading insurers on board with this industry-led initiative, the biggest names among them, it demonstrates the industry is “proactively rising to the occasion”.
And rise they need to, considering that the societal impacts of climate change which have become ubiquitous. “In 2020 along, the world witnessed massive wildfires in California and Australia, historic floods in China, and a record hurricane season in the Atlantic,” adds Ariss.
The first report lays the foundations and framework
Following engagement with regulators, supervisors, rating agencies and the scientific community to identify the most appropriate approaches to climate risk assessment tools, the task force has released its first report – an integrated decision-making framework for climate risk assessment.
The task force founds that for both P&C and life re/insurers, climate change poses different levels of physical and transition risks to both sides of the balance sheet, liabilities and assets.
The report, Climate Risk Assessment for the Insurance Industry, outlines how climate risk assessment requires qualitative and quantitative approaches over short- and long-term time horizons and must account for uncertainties associated with transitioning. Knowledge sharing across companies and with other stakeholders is critical to raising risk awareness and leveraging all available expertise.
This first report “lays the foundation for us to design and test methodologies and tools, in collaboration with regulators and the scientific community, to converge on robust solutions for P&C and life insurers”, says Maryam Golnaraghi, Director Climate Change and Emerging Environmental Topics and project leader.
The task force will continue its work analysing the insurance regulatory landscape related to climate risk and conduct a technical 'deep dive' to develop scenario analysis and qualitative and quantitative tools.
Four CPG giants to fund sustainable accelerator programme
Breakthrough ideas can come from anywhere and anyone. That’s the premise behind the coming together of The Coca-Cola Company, Unilever and Colgate-Palmolive in the funding and support of world-leading brewer AB InBev’s 100+ Accelerator program.
These four consumer packaged goods multinationals will leverage both their size and resources to fast-track a shift toward sustainable solutions by mobilising some of the world’s sharpest thinkers to solve some of the world’s most pressing sustainability challenges.
The aim of this collaboration is to “supercharge adoption of sustainable solutions by funding the accelerating fantastic innovations that will change the world by making all of our businesses more sustainable”, says Tony Milkin, chief procurement, sustainability and circular ventures officer at AB InBev.
“Sustainable business is smart business, and we are working to solve huge problems that no one company can handle alone. With our combined global reach, we can accelerate progress towards a more sustainable future.”
What is the 100+ Accelerator program?
Originally launched in 2018, 100+ Accelerator is a global incubator program that aims to solve key supply chain challenges across water stewardship, circular economy, sustainable agriculture and climate action.
It offers size and scale to passionate entrepreneurs to help bring their solutions to market faster, and the program’s first two cohorts have already piloted 36 innovations in 16 countries, with participating startups raising more than US$200m to help them scale globally.
Among the established innovators are those already creating huge impact on sustainability, with projects including the first solar thermal plant in Africa, recycled electric vehicle batteries that store renewable electricity in China, and upcycling saved grains from the brewing process to produce nutritious foods in the US.
- The implementation of green cleaning solutions to reduce water and energy use in brewing operations in Colombia
- Solutions delivering traceability and insurance for smallholder farmers in Africa and South America
- The collection of more than 1,000 tons of glass waste in Brazil
- Piloting returnable packaging in the United States
- Recycled electric vehicle batteries that store renewable electricity in China
- The ability to upcycle saved grains from the brewing process to produce nutritious foods in the United States
- The first solar thermal system to be installed at an AB InBev plant
How will the new program work?
So, how does it work? Applications are invited from entrepreneurs or small businesses (deadline for cohort 3 is May 31 2021) and the partners will choose 20-25 ideas which are then provided with funding.
Project aligned with goals of the CPG multinationals
The participation by all three consumer packaged goods giants is in line with each of their own sustainability goals, with each passionate about transforming global supply chains towards a greener future, and knowledgeable that “we can achieve our purpose faster and more effectively with equally committed partners”, says Patricia Verduin, CTO of Colgate.
Since launching its World Without Waste sustainable packaging platform, Coca-Cola has actively engaged the startup community for inspiration and innovation and is an inaugural investor in Circulate Capital, a fund launched in 2019 focused on ventures, infrastructure and innovations preventing the flow of plastic into oceans.
The program’s social inequality component is also aligned with Unilever’s values. “This year, we made commitments to ensure that everyone who directly provides us with goods and services receives a living wage by 2030,” says Marc Engel, chief supply chain officer of Unilever. But that’s not all. “We’re increasing our spend with suppliers from underrepresented groups and committed to train 10 million young people.”