The ClimateWise Principles Independent Review 2020 was published last week, and findings show member insurance industry firms have made significant progress in disclosing their preparedness and response to climate change. ICMIF members Ecclesiastical (UK) and Swiss Re are both members of ClimateWise.
ClimateWise is a voluntary global membership initiative which brings together reinsurers, insurers brokers and industry service providers to respond to the opportunities and challenges presented by climate change. The initiative is coordinated through its secretariat based at the University of Cambridge Institute for Sustainability Leadership (CISL) within the Centre for Sustainable Finance (CSF).
The Review records a significant increase in average score – from 55 per cent in 2019 to 65 per cent in 2020 – for the ClimateWise group of organisations. The increase in group scores in 2020 has been predominantly driven by members demonstrating significant progress in the incorporation of climate change considerations into investment and underwriting strategies, high participation by members in climate stress tests and improvements made in the integration of climate risk into existing risk management frameworks.
According to ClimateWise, there remains scope for improvement and there is still a need for urgent action across the industry. The main focus for members this year will be on deepening the exploration and transparency of strategic resilience to climate change. This will most notably be through expanded adoption and depth of scenario analysis, demonstrating the outcomes and implications on resilience and the resultant impact on decision-making.
In his foreword for the Review, HRH The Prince of Wales confirms his long-held believe that the insurance industry has a key role to play through its understanding of physical and transition risks: as a significant asset owner; through its innovative underwriting; and through engagement with its clients across the global community.
HRH The Prince of Wales says his belief is that as understanding of climate risk improves, the insurance industry will try to increase its own resilience to those risks through new restrictions and coverages. He points to three issues which he says are critical:
Firstly, a vital part of the ClimateWise group’s mission and work streams is to innovate products that address climate change
Secondly, the insurance sector needs to insist on better construction methods within built resilience to natural catastrophes
Thirdly, there is an urgent need to have well organized and rapid post event responses.
HRH The Prince of Wales launched the ClimateWise Principles in 2007, and now says that fourteen years later, it is pleasing to see a strong increase in the average ClimateWise Principles score over the past year, reflecting the action being taken across the industry. But he fears progress is too slow and must be expedited.
In addition, having seen engagement on the transition to net zero from the asset side of the business, HRH The Prince of Wales is keen to see a move to net zero ambitions on the underwriting side, so that insurance companies can take action and drive change with their clients across the economy.
ICMIF members feature in the report, one of which is Ecclesiastical, a specialist mutual insurer based in the UK. Sub-principle 2.3 encourages members to collaborate and share knowledge of risk management and modelling expertise and Ecclesiastical is mentioned for the development of its own UK Freeze event model, which it is sharing with reinsurers to develop it further.
Ecclesiastical has also supported a Master’s degree course in Sustainable Heritage at University College London for over a decade. This support demonstrates Ecclesiastical’s commitment to ensuring that key heritage skills are preserved.
Another member featured in the Review is Supporting Member Swiss Re. A key pillar of Swiss Re’s sustainability strategy is to develop new products to mitigate or adapt to climate change. Swiss Re aims to become a leading provider of re/insurance solutions for low carbon transition opportunities. It provides all types of renewable energy re/insurance with a particular expertise in offshore wind solutions.
The Review also mentions Swiss Re’s unique employee engagement programme, COyou2, which offers subsidies to employees for a range of climate-friendly investments.
Swiss Re is commended too for having demonstrated its proactive engagement in climate-related issues including being a signatory to the UN Global Compact Business Ambition for 1.5°C and a founding member of the UN Net-Zero Asset Owner Alliance.
The ClimateWise Principles have provided a framework for the insurance industry to disclose climate-related risk and opportunity since 2007. All ClimateWise members report annually against this framework. Reports are independently reviewed, scored and anonymised in a combined report to form the ClimateWise Principles Independent Review.
Aligned with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations in 2019, this review marks the second year of TCFD compliant reporting. ClimateWise says the results are encouraging, indicating its members will be well prepared for forthcoming mandatory TCFD reporting.