Climate change futures: health, ecological and economic dimensions

CONCLUSIONS
AND RECOMMENDATIONS
Just as we underestimated the rate at which climate
would change, the biological responses to that
change and the costs we would incur, we may have
underestimated the manifold benefits we can derive
from a clean energy transition.
The financial sector — having a long time-horizon and
a diversified international portfolio — is the central
nervous system of the global economy, sensing disturbances
when they begin to percolate in many parts of
the globe. Energy lies at the heart of all our activities
and all of nature’s processes. With the energy infrastructure
in trouble, insurers may soon be asking if the
future is insurable.
FOSTERING AWARENESS OF CARBON RISKS,
EXPOSURES AND OPPORTUNITIES
Understanding the risks and opportunities posed by climate
change and sensitizing others is the first step
towards taking corrective measures. A broad educational
program is needed to better inform businesses,
regulators, governments, international bodies and the
public as to the science and impacts of climate
change. The health of large regional and global
ecosystems that support us is at stake.
Regulators and governments need to understand the
science in order to frame regulations in climate-friendly
ways. Special attention should be given to identifying
misaligned incentives and market signals that perpetuate
environmentally destructive practices.
Of the three emerging exposures for the insurance and
investment sectors — climate instability, terrorism and
tectonic shifts — the first two may be directly or indirectly
tied to our dependence on oil. Exiting from the age
of oil is the first and necessary step toward improving
the environment and our security and achieving sustainable
development (Epstein and Selber 2002).
Together, finance, UN agencies, scientists and civil
society can seize the opportunities. The combination of
a) focused lending and investment, b) targeted insurance
coverage, and c) sufficient economic incentives
from governments and international financial institutions
can jump-start “infant” industries and sustain an economically
productive, clean energy transition.
POLICIES AND MEASURES
The global nature of the problems associated with a
rapidly changing climate often seems overwhelming.
Multiple measures at various levels are required, but
the political will to undertake them is often difficult to
initiate, much less sustain. Coordinating actions by various
stakeholders can be particularly daunting.
Yet change is necessary, and involvement of all sectors
of society is needed. With careful steering and an
expansive dialogue, societies can reduce risks and
benefit from the opportunities. With this in mind, the
editors and authors of this report have divided proposals
into two categories — fostering awareness and
taking action.
Firms can better understand their own exposures to the
physical and emerging business risks — including litigation,
legislation, shifts in consumer choices and
activism within civil society. In the energy transition
ahead, companies can identify ways to profitably
address the challenges.
For insurers, climate change challenges all aspects of
their core business, including property and casualty,
life and health, and financial services. Insurers can
amass more pertinent information on climate risks as
the past becomes a less informative predictor of the
future and share this knowledge with other stakeholders
through interactive dialogues.
Investors and financial analysts can evaluate portfolios
for climate risks and opportunities, and capital market
professionals can add climate screens to their study of
balance sheets and market possibilities. Capital markets
sometimes miss the “signals” coming from climate,
paying attention only to large, obvious events such as
hurricanes and typhoons.
And citizens can learn about their own carbon footprint
— the amount of carbon their own activities
release into the environment — driven by their consumption
patterns and political choices. Civil society
has a central role to play in building awareness in all
sectors and helping businesses, governments and international
financial institutions formulate measures for fundamental
change to achieve clean and sustainable
development.
107 | FINANCIAL IMPLICATIONS