Current climate information insufficient, say world's financial institutions
Frankfurt/Geneva/Nairobi, 12 January 2011 - The availability of and access to climate change information remains insufficient, according to many of the world's leading financial institutions. A pioneering study launched today confirms the increasing financial relevance of climate change and the fact that insurers and lenders need better information regarding the physical and economic impacts of the world's changing weather patterns.
The report, sponsored by the German Federal Ministry of Education and Research, presents the results of an international survey undertaken by the Climate Change Working Group (CCWG) of the United Nations Environment Programme Finance Initiative (UNEP FI) and the Sustainable Business Institute (SBI), Germany. More than 60 institutions, from both developed and developing countries, took part in the survey.
Financial service providers and their customers are increasingly affected by the impacts of climate change, such as extreme weather events. Moreover, the survey shows that insurers, reinsurers, lenders, and asset managers expect these kinds of risks to increase in the future.
Given that financial institutions are able to influence their clients and investee companies across all sectors of the economy, they can play a key role in accelerating the implementation of adaptation measures by the private sector.
But in order for the sector to manage climatic risks affecting their business portfolios and to give the best possible advice to their customers, financial institutions need access to applied information such as climate change predictions, modelling, analysis, and interpretation. Such information needs to be appropriate to the duration of contracts, the regions where customers hold assets or undertake operations and the hazards that are material to the operations of borrowers, investees, and the insured.
"To date the key role that financial institutions and other private sector decision- makers can play in increasing the climate resilience of economies and societies has been neglected at best", said Paul Clements-Hunt, Head of UNEP Finance Initiative. "The rapid reduction in greenhouse gases and the adaptation to the unavoidable effects of global warming need to go hand-in-hand if we are to cope with the climate challenge. This study is a first step in identifying what is needed so that financial institutions can start playing their important role in accelerating the shift to climate-resilient economies", he added.
Climate change forecasts and predictions of the resulting economic impacts will never be perfect and will inevitably feature some element of uncertainty. But the more information and expertise regarding climate change and its uncertainties that is available to financial institutions, the better these risks can be calculated. This will enable insurers, reinsurers, lenders, and asset managers to price and absorb these risks more effectively.
This can be crucial not only to the performance of individual businesses and financial institutions, but to the entire economic tissue of communities affected by climate change and the social well-being it underpins.
"Financial institutions are experts in identifying, quantifying and pricing risks. This expertise can be of great value to society at large when faced with the sheer uncertainty linked with changing climate patterns and the significant risks of resulting impacts", said Mark Fulton, Managing Director at Deutsche Bank Climate Change Advisors and Co-Chair of UNEP FI's Climate Change Working Group (CCWG). "This study confirms that what private sector institutions need in order to become real 'adaptation catalysts' is objective and reliable information. We need to work towards enhancing the access of private sector decision makers to climate information as well as, most importantly, improving the reliability and accuracy of our climate models and forecasts", he added.
The survey identified that such information gaps can be closed by continued research towards more reliable climate modelling and forecasting, as well as enhanced translation of scientific knowledge and existing information into user-friendly information. Such efforts are likely to require more intensive collaboration between users and suppliers, public and private actors, scientists and decision makers.
Notes to Editors:
The survey is available at www.unepfi.org
For more information please contact:
Remco Fischer, UNEP Finance Initiative, firstname.lastname@example.org, +41229178685
Anke Hummel, Sustainable Business Institute (SBI), email@example.com, +496723996320
About the United Nations Environment Programme Finance Initiative (UNEP FI)
UNEPFI is a global partnership between UNEP and the financial sector. Over 190 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. Through its Climate Change Working Group (CCWG), UNEP FI identifies the roles of the finance sector in addressing climate change, and advances the integration of climate change factors - both risks and opportunities - into financial decision-making. This is done through a comprehensive work programme encompassing research, training, events and regional activities. For more information, please visit: www.unepfi.org
About the Sustainable Business Institute (SBI) Germany
SBI Germany is a research centre founded in 1987 - the year in which "Our Common Future", the Brundtland Report, was published by the United Nations World Commission on Environment and Development. Since then, SBI has been working on a wide spectrum of issues and conducted studies with several national and international stakeholders including United Nations Conference on Trade and Development (UNCTAD) and United Nations Environment Programme (UNEP) and the German Government. Among these were studies on sustainable and responsible investment, Foreign Direct Investment (FDI), voluntary agreements and environmental management. Furthermore, we are publisher of www.sustainable-investment.org.
SBI is currently focused on the role of financial service providers regarding climate change adaptation and mitigation.