Geoff Summerhayes is a board member at the Australian Prudential Regulation Authority (Apra) responsible for the insurance sector, and is at the forefront of developing a coordinated global regulatory response to climate change.
Domestically, he chairs the Council of Financial Regulators' working group on climate change, and internationally, he holds two key roles: chair of the Sustainable Insurance Forum (SIF), a global body of insurance regulators collaborating on sustainability and climate change; and sustainability champion at standard-setter the International Association of Insurance Supervisors (IAIS), where he also sits on its executive committee.
He also represents the latter two bodies at the Central Banks and Supervisors Network for Greening the Financial System.
What inspired you to work on climate change issues?
I was appointed to the board of Apra in 2016 and climate change was, of course, a big issue but the understanding of financial risks by banks, pension funds and insurers was surprisingly immature.
Apra was concerned about financial risks given the Paris Agreement, TCFD and an influential legal opinion in Australia on directors' duties on climate risk. The Apra board agreed a strategy to raise awareness of climate change financial risk through a series high profile speeches and industry engagement.
Apra is the prudential regulator so it was important to align the conduct regulator (the Australian Securities and Investments Commission) and the Reserve Bank of Australia, which also had a growing interest in the impact of climate risk. A Council of Financial Regulators Working Group was established to guide and align the agencies' climate risk initiatives.
Climate financial risk awareness and engagement by financial firms and their boards has increased markedly. In 2019, Apra published the results of a survey of the largest banks, pension funds and insurers showing a significant improvement in risk awareness and progressive alignment to the TCFD.
What are your work priorities right now?
Improving climate risk modelling, scenario analysis, stress testing and climate taxonomy.
This year, the SIF and IAIS are developing an application paper which will link climate risk to the IAIS Insurance Core Principals (ICPs). The ICPs are the global guide for regulators to supervise insurers firms. The IAIS is the first global standard setting body to publish such climate guidance and this is a significant step in the regulatory architecture.
Tell me one step the insurance industry needs to take, to improve its response to climate change?
A recent IAIS stakeholder webinar indicated over 75% support for mandatory TCFD disclosure. Greater transparency will help drive improvements in taxonomy and market-related risk comparisons.
Are you optimistic or pessimistic we can avoid the worst effects of climate change?
There is no avoiding the cost of climate change. The only choice we have is how, where and when that cost emerges and in what form – transition or physical risk.
Covid-19 has taught us that unimaginable change is possible, but it requires all of humanity to act in an aligned way.
What are you doing personally to reduce your climate impact?
At a professional level, I hope I have made a difference to the resilience of financial firms both in Australia and internationally.
At a personal level, we do our best to adopt a sustainable mind-set. I drive a Tesla, we use solar power, source local food produce and have a small farm south of Sydney where we have adopted regenerative farming practices and sequester carbon. Like my wife Henrietta says: "Make a difference".