Global investors mobilize action at Investor Summit on climate risk

Thursday, 28 January 2016

The International Cooperative and Mutual Insurance Federation (ICMIF) participated yesterday (27 January 2016) in the Investor Summit on Climate Risk: Advancing the Clean Trillion, which examined what the historic climate deal, the Paris Agreement made at the UN Conference on Climate Change (COP21) in December 2015, means for investor funds and portfolios in the months and years ahead. Co-hosts for the Summit were Ceres, the United Nations Foundation and the United Nations Office for Partnerships.

The Summit was held at the United Nations headquarters in New York (USA) and was the first major event on climate change for investors and businesses to discuss the far-reaching implications of the Paris Agreement. The event was attended by more than 500 global investors who collectively represent more than USD 22 trillion in assets, and are at the forefront of the bid to begin mobilizing the trillions of dollars needed to catalyze the clean energy transition.

Shaun Tarbuck, CEO, ICMIF, took part in the panel on Insurers investing in climate solutions: Managing risk and return and shared how ICMIF members and the cooperative and mutual insurance sector are demonstrating their commitment to marshalling their resources and expertise to support the UN’s climate deal. The mutual and cooperative sector held over USD 8.1 trillion in assets in 2014 and represented 27.1% of the global insurance market writing USD 1.3 trillion in insurance premiums.

The panel looked at how the global (re)insurance industry, the second largest in the world by assets, can contribute to reducing reliance on fossil fuels and increasing resilience. A distinguished panel of insurance investment experts explained how they were leading their respective organizations to build the core internal capabilities required to successfully realize the investment opportunities.

Other panellists were:

  • Cynthia McHale, Director, Insurance Program, Ceres (Moderator)
  • Michael J. Morrissey, President & CEO, International Insurance Society (opening remarks)
  • Ric Abel, Managing Director, Prudential Capital Group
  • Dave Jones, California Insurance Commissioner
  • Manuel Lewin, Head of Responsible Investment, Zurich Insurance Company
  • Stephanie Maier, Head of Responsible Investment Strategy & Research, Aviva Investors

Speaking at the event, Shaun Tarbuck said: “The Climate Change Summit (COP21) in Paris was a landmark event for the insurance sector, for ICMIF and for our members.

“The insurance sector is one of the largest industries in the world. With 6% of the global GDP; annual premium income of USD 5 trillion and assets of USD 35 trillion, insurance is a very significant sector in terms of growth, jobs and investment. The USD 35 trillion of assets held by the insurance sector represents about one third of total global investable assets,” he continued.

“The mutual and cooperative insurance sector represents around one third of the total insurance market with 40% market share in countries such as USA, Japan, France and Germany. Our members have made a serious and wholehearted commitment to playing our part in the climate change debate and in providing solutions that are practical and properly funded.”

Last year ICMIF launched the Smart-Risk investing initiative which seeks to redefine all ‘green finance’ as ‘Smart Risk investing’ to bring in all investible assets classes and overlay the risk management knowledge from the underwriting side to asset side of the balance sheet. The initiative will also provide a framework for insurance sector asset managers around smart risk investing and change the culture towards long-term risk management.

During a Private Finance Climate Session at COP21 Tarbuck announced that the goal to double the USD 42 billion investment in green finance to USD 84 billion by end of 2015 had been met. A select number of members of ICMIF and the International Insurance Society, those that are industry champions in this area, had already collectively invested USD 109 billion in Smart Risk investing.

The next phase of defining Smart Risk investments; providing a framework for all asset classes; and changing the behaviour of the asset managers in insurance is under way. ICMIF and partners are in the process of establishing a high level advisory panel to lead the next phase starting early in 2016. 

This advisory panel will apply the knowledge that the underwriting side of the industry has in relation to risk and modelling to the investible asset side of the business.  Thereby driving smarter investment decisions and embedding resilience into investments.  The framework and definition will embody the UN frameworks agreed in 2015, including the Sendai agreement on disaster risk and resilience, the SDGs and the climate change agreement agreed at COP21.

The Paris Agreement, involving 196 countries, set a goal to limit global warming to less than 2 degrees celsius. This gave the low-carbon policy signal that many in the investment sector been waiting for and yesterday’s summit explored the investment opportunities that it provides, with a focus on: the types of capital flows necessary to achieve its goals; opportunities to expand clean energy investment in developed and developing countries; and solutions to mitigating carbon asset risks, including portfolio de-carbonization and support for economic development that is less reliant on fossil fuels.

UN Secretary-General Ban Ki-moon challenged investors to double their clean energy investments by 2020. Such investments hit a record high of USD 329 billion in 2015, however, significant gaps remain in increasing clean energy at the levels required to meet the 2 degrees target.

Ban Ki-moon said: “Today, I call on the investor community to build on the strong momentum from Paris and seize the opportunities for clean energy growth. I challenge investors to double – at a minimum – their clean energy investments by 2020. Sustainable, clean energy is growing, but not nearly fast enough to prevent excessive global warming that would trigger profound economic disruption and human suffering. The investor community is of critical importance if we are to move from aspirations to action.”

“Investors are better positioned than ever before to address climate risks and seize the economic opportunities presented by clean energy,” said Mindy Lubber, president of Ceres and director of its Investor Network on Climate Risk (INCR), the U.S. network of pension funds and asset managers working to address the financial risks of climate change. “Ultimately, global investment portfolios need to shift far more capital to low-carbon business activity and away from risky high-carbon sectors that may perform poorly in the years ahead.”

Learn more by viewing the agenda and the full list of speakers.

Watch the recording of the event on UN Web TV.

Image shows (left to right): Ban Ki-moon, Secretary-General, the United Nations; Michael R. Bloomberg, Founder, Bloomberg LP and Bloomberg Philanthropies & Three-Term Mayor of the City of New York, United Nations Secretary-General’s Special Envoy for Climate Change; Mary Schapiro, Former Chairman, U.S. Securities and Exchange Commission (SEC); and Tom Keene, Editor-at-Large, Bloomberg News & Host, Bloomberg Surveillance (Moderator).