“Advancing adaptation through CLIMATE INFORMATION SERVICES –
Results of a global survey on the information requirements of the financial sector”
Remco Fischer (UNEP FI)
Geneva, December 13th, 2011
1
Content
1. The study
2. Reasons for and purpose of the study
3. Respondents
4. Key messages I and II
5. Climate Change: Affecting financial service providers differently
 Insurers and reinsurers
 Lenders
 Asset managers
6. Information needs
 Regional orientation
 Sectoral orientation
7. Information formats
8. Public-Private partnerships
9. Further action
2
The study, Advancing Adaptation through CLIMATE
INFORMATION SERVICES …
 was conducted by the Climate Change Working Group (CCWG) of the United
Nations Environment Programme Finance Initiative (UNEP FI) and the Sustainable
Business Institute (SBI)
 as part of the project “Climate Change, Financial Markets, and Innovation (CFI)”,
sponsored by the Federal Ministry of Education and Research (BMBF), Germany,
and supported by the German “Climate Change Finance Forum”
 builds on earlier studies of UNEP FI (“Adaptation and Vulnerability to Climate
Change: The Role of the Finance Sector”) and SBI (“Jointly Developing Climate
Information Systems: Requirements for the CLIMATE SERVICE CENTER (CSC)
from the perspective of the financial sector”)
 is a contribution to the international dialogue on climate research and observation as
well as information services and adaptation strategies
3
Purpose of the study
 International efforts of climate change mitigation will hopefully lessen climate
change, but significant impacts from climate change are unavoidable
 Increase of weather extremes in the last decades show the need for more
professional risk management and advanced adaptation
Therefore the study:
 Examines how the business of financial service providers is affected by direct risks /
physical impacts of climate change today, and how they expect that exposure to
develop in the future
 Identifies the respective information needs of these international financial service
providers
 Raises some of the key issues regarding improved climate information systems for
better risk management and advanced adaptation - within and beyond the financial
sector
4
Respondents
 The study provides insights into the perceptions of international financial service
providers of five continents (65 respondents, approximately one third of all UNEP FI
members)
 Three different types of financial services
 Insurance (11 responses)
 Lending (35 responses)
 Asset management (19 responses)
 They are working with a wide rage of clients in all continents and in all sectors
5
Key messages of the study I
Respondents consider
 their own business as well as their clients‘ business as increasingly affected by the
direct risks / physical impacts of climate change and expect an increase of such
risks in the future.
 the access to existing information on such impacts and their likeliness and/or
availability at all, as not sufficient.
 more precise information on climate change (impacts) as essential for effective risk
management (for identifying, quantifying, and pricing risks).
6
Key messages of the study II
International financial service providers (insurers, lenders and asset managers) consider
 information at the regional level within a time horizon of 5 to 10 years and the
interpretation of the reliability of climate change (impact) predictions as most relevant.
 climate change expertise as a relevant (emerging) competitive factor within the
financial sector.
 the development of climate information services as a relevant private and public task.
7
Climate Change: Affecting financial service providers
differently
 regarding the economic effects and perceptions of climate change impacts and risks, it
is relevant to differentiate between different types financial service providers.
 the individual financial branches differ significantly in terms of their types of risks
(insurance, credit and investment risks) and time horizons (ranging from hours and
days to years and decades).
 accordingly, their information needs regarding climate change, also differ significantly.
 predictions and analyses will have to be customised to the type, location, and
customer base of the financial institution concerned.
8
Insurers and reinsurers
Eleven insurers participated. They
 recorded an increase in weather-related losses (10), and expect these to increase
(11)
 reported an accumulation of such risks (8), and expect accumulation risks to
increase (11)
 expect risks to change (8), and anticipate these changes will accelerate in the future
(9).
 Amendments to insurance products are happening (7) or will become unavoidable
(11)
 Insurers and reinsurers are developing new insurance products (9) or plan to do so
in future (11)
9
Question 2 – relevance of climate change?
Aviation, Marine and Transport Insurance
Credit and Surety Insurance
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
10 years
10 years later
Motor Insurance
2.5
2.0
Relevance
now
2.5
2.0
1.5
10 years
1.0
1.0
1.0
0.5
0.5
0.5
10 years
10 years later
Now
10 years later
2.5
2.0
1.5
1.0
1.0
10 years
10 years later
0.5
now
10 years
10 years later
10 years later
Accident and Health Insurance
1.5
0.0
0.0
10 years
3.0
2.0
0.5
now
10 years later
2.5
1.0
0.5
10 years
Agroforestry Insurance
1.5
10 years
now
3.0
2.0
now
0.0
0.0
now
2.5
0.5
10 years later
1.5
1.0
0.0
10 years
1.5
Engineering Insurance
1.0
now
1.5
3.0
1.5
0.0
2.0
Property Insurance
0.5
2.5
2.0
10 years later
3.0
3.0
2.0
0.0
now
2.0
1.0
3.0
3.0
2.5
1.5
Life Insurance
Average Relevance of Climate Change to Risk Management and
2.5
2.5
Transfer
Activities Over Time
0.0
0.0
Financial Lines Insurance
Casualty and Liability Insurance
0.5
0.0
0.0
now
10 years
10 years later
now
10 years
10 years later
10
Question 3 – insurer action: processes
Lines of insurance
Response to Climate Change in the Past 5 Years
Risk underwriting
35
Risk quantification and modelling
34
Loss prevention measures
31
Risk research
31
Product development
26
Risk mapping
26
Risk survey
26
Loss reduction measures
22
Claims management
18
Traditional reinsurance and retrocession
18
Insurance-linked securities
13
0
5
10
15
20
25
30
35
40
Number of Respondents
11
Question 8 - to do´s for government - internationally
Degree of effectiveness
Degree of Effectiveness per Government Action at a
International Level
2.6
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2.50
Weather
2.44
Research
2.38
Models
1.56
1.44
1.33
Subsidies
Drainage
Irrigation
Government Action
12
Lenders
 Less than half of the respondents feel that “already today” their credit transactions
are affected by:
 An accumulation of risks (17 out of 35)
 Changing risk patterns (15 out of 35), and
 Increased credit losses due to direct, physical effects of climate change (12 out of 35)
 But about 80% feel climate-change-induced risks will be more important “in the
future”
 And about 80% will modify and/or extend credit risk assessment practice to address
those risks
Lenders’ current practice
on treating climate change
as a risk factor
13
Asset managers
 Analysts and asset managers rely on highly aggregated information, or self-reporting
by companies
 Asked about the integration of direct effects of climate change when conducting due
diligence and stock picking
 7 out of the 19 answered: “Yes, systematically always”.
 9 out of the 19 replied: “Yes, but only in exceptional cases”
14
Information needs
 Less than half of the respondents feel they are sufficiently well-informed. Even for
historical weather data, less than half (43%) feel adequately informed.
 The majority of respondents rated historical weather data nearly as important
information as climate predictions.
 The highest importance regarding the significance of information is attached to the
category “advice on reliability of predictions” (about 80% of respondents).
 Climate change predictions for the local and regional level and the time horizon of
the next 10 to 30 years are not available or reliable enough for many purposes of the
financial sector and the available information is not in a user-friendly state.
15
18.03.2016
Regional orientation
 Climate change is affecting the various regions of the Earth in different ways.
 There is a large information gap for continents with a high number of developing
countries, but the demand for better climate information refers to all macro-regions
of the world, not only those where information infrastructure is less developed.
16
18.03.2016
Sectoral orientation
 A key question for financial services providers is how exactly different client
segments and economic sectors will be affected by climate change.
17
18.03.2016
Information formats
Respondents are interested in a wide range of different information formats:
 Periodical reports about the effects of climate change on certain sectors and
companies (61)
 Best practice cases on tackling risks and opportunities in the financial services
industry (60)
 Periodical reports about the effects of climate change on certain regions (51)
 Further training (seminars / conferences) (33)
 Online services (FAQ etc.) (27)
 Ad hoc statements / Expert opinions (27)
 Periodical reports about the state of the art in climate science (27)
18
Public-private partnerships
 A portion of the required services can be generated privately – and therefore might
be seen as a private good.
 Reliable climate change information for risk management and adaptation measures
within the private sector needs a long “value chain” of research, public climate
(impact) models, open debates on and interpretation of quality and confidence of
these models and their predictions as well as access to standardised (historical)
weather information.
 The respondents (62 of 65) expressed a broad and strong interest to collaborate
with weather and climate data and information providers, research institutes, and
other partners regarding the (further) development of various information services
and formats:
 Sectoral and regional studies,
 Loss and catastrophe models and various databases
19
Further action
 The survey participants are particuarly unsure about the nature and implications of
how exactly climate change related risks will affect their financial firms and their
clients.
 This uncertainty needs to be reduced. Predictions and analyses will have to be
customised to the type, location, and customer base of the financial institution
concerned.
 Certainly the questions of how to design, organise, and finance a worldwide
information architecture and related services drawing on public and private actors
needs much more discussion and step by step development – bottom up from
interaction on a regional and national level and top down from a global perspective.
 It is time for a broader national and international discussion on the different roles and
responsibilities as well as types of co-operation of the public and the private sector
actors – along the climate information value chain.
20