Risk management and insurability are key elements in sustainability and climate change adaptation

climate change

A high-level conference will take place on 22 March 2018 in Brussels to discuss the final report of the EU High-Level Expert Group on Sustainable Finance (HLEG) and EU strategy. FERMA welcomes the HLEG’s call on insurance companies to promote loss prevention and support risk-mitigation behavior. Similarly, in the context of the revision of the EU strategy on adaptation to climate change, FERMA is urging the European Commission to take into account the value of professional risk management practice within businesses to increase resilience to extreme weather events.   

The HLEG report, published on 31 January 2018, provides 24 recommendations for the Commission to encourage long-term investments that take into account environmental, social and governance considerations, collectively described as sustainable finance.

To implement the Paris Agreement and achieve the EU's 2030 targets of a 40% cut in greenhouse gas emissions, €180 billion of additional investments a year will be necessary, for example, for renovation and energy efficient buildings, renewable energy and low-carbon transportation. Some of this funding will need to come from private capital. The insurance sector, as an institutional investor, is a major actor for sustainable finance and the HLEG report reiterates the responsibility of the sector in keeping climate-related risks insurable.

Three other recommendations in the HLEG report are of interest for the risk managers and their businesses:

  • Classification – a new taxonomy is advocated to indicate when an activity or asset is considered “green”/ sustainable” in order to help the markets direct financial flows towards sustainable investments.

  • Information - revised market rules to clarify investors' duties and integrate Environmental, Social & Governance (ESG) factors into client information and decision-making.

  • Reporting – sustainability and climate disclosure by financial institutions and companies to indicate their level of exposure to long-term climate-related financial risk and how they take sustainability into account in their decision-making.

On 23 January 2018, FERMA participated in a stakeholder workshop in Brussels organised by the Commission about the ongoing evaluation of the EU Strategy on Adaptation to Climate Change. This meeting was particularly timely in the context of the online public consultation now open until 1 March 2018, to which FERMA is preparing a response. We will publish details in the next FERMA newsletter.

Sustainability is one of the two themes developed at the FERMA Seminar in Antwerp on 8-9 October. A dedicated panel will address the risks and opportunities arising from adaptation to climate change. The risk and insurance community will discuss with policymakers how better risk awareness and professional risk reduction strategies can support the introduction of “climate logic” into businesses.