WTW's global ICT climate lead Adhiraj Maitra and Dr Simon Young, senior director in WTW's Climate and Resilience Hub, describe the company's recent achievements in climate risk management, and challenges in the transition to net zero
What have been WTW's key achievements in addressing climate risk over the past year?
Adhiraj Maitra: It has been an incredibly busy and productive year for WTW. A few of our key achievements are:
- Meso-American Reef (MAR) fund: This ground-breaking fast-paying parametric hurricane insurance programme, to enable reef restoration, demonstrates how novel approaches to risk financing can incentivise and deliver the rapid action that is so beneficial to building reef resilience in the face of the increasing impacts of climate change, from warming oceans to severe weather events. AXA Climate was appointed as the insurance solutions provider to support the MAR insurance programme.
- Catastrophe wrapper: Placement of the world's first parametric insurance transaction to help enable ground-breaking debt restructuring for marine conservation by the Government of Belize. The parametric wrapper is a game changer for the financial resilience of island and coastal nations and will help to unlock the financing of nature-based solutions in achieving global net-zero and biodiversity targets.
- Launch of Climate Transition Pathways (CTP) and the Climate Transition Index (CTI): These products are designed to accelerate the transfer of finance (insurance, debt and equity) to organisations transitioning to the low-carbon economy whilst minimising the risk to the economic system. Through CTP we are helping lead the industry in ensuring these organisations are supported through an orderly transition and can continue to access insurance and benefit from a greater level of certainty around the future availability of risk capacity, helping them deliver a more sustainable future. CTI is an innovative, proprietary approach that looks beyond simple strategies such as carbon exposure and enables investors to address the financial risk to company share prices caused by a climate transition by building balanced, mainstream, Paris-aligned portfolios.
- Our contributions to industry standards and guidance: This is exemplified by the launch of the UK's Climate Financial Risk Forum guidance for data and metrics and scenario analysis for financial institutions addressing the Biennial Exploratory Scenario.
What are the biggest challenges for insurers in the transition to net zero?
Adhiraj Maitra: One of the biggest challenges is around data – being able to monitor emissions at an asset/insured level is currently a difficulty faced by most in the industry. An underwriting approach ably supported by data and analytics is essential in achieving net-zero commitments.
It is as much about interpretation of the data, and how their policies and decisions enable the net-zero transition, as it is about the data itself.
The other challenge is the ability to adapt. As policy, regulations and expectations evolve there is a need to think beyond the one-year horizon, plan for the mid-to-long term future, and evolve the underwriting framework to not only assess ESG related risks appropriately, but also develop innovative, sustainable products for the future.
Finally, the ability to connect all the functions in an organisation to provide a holistic vision will be a key element in successfully achieving these ambitions.
How concerned is WTW about biodiversity risk? What is WTW doing?
Simon Young: We're very concerned. We signed up to #backblue. We're working with a range of actors in the conservation and biodiversity protection space, including most of the large global NGOs, as well as smaller local organisations, bringing risk management tools and solutions to help unlock investment in biodiversity protection and rejuvenation.
We're participating in initiatives to encode biodiversity impacts into emerging regulation, and advising our clients on what this will mean for them. And on the HR side, we're helping companies to be better stewards of the environment through, for instance, raising money from their employees to fund initiatives in the communities where they live and work and in which their clients live and work.
