Jakob Thomä is managing director of the 2° Investing Initiative (2DI), one of the largest independent financial sector think-tanks in the world and a leading think-tank at the climate-finance nexus.
He has been a leading voice in the insurance industry's actions on climate change. He designed the first public climate scenario analysis exercise conducted by an insurance supervisor (with the California Department of Insurance in 2018), and co-designed an internal insurance stress-test exercise as academic advisor to the Bank of England in 2017.
He currently supports the European Insurance Occupational and Pensions Authority and Swedish Finansinspektionen on their respective climate scenario analysis exercises.
In addition, Thomä has pioneered the development of climate scenario analysis tools by insurance companies, leading the development of the PACTA tool (www.transitionmonitor.org), which runs roughly 600 portfolio tests every month.
The work of 2DI has over the past years informed disclosures and climate actions by Allianz, Axa, Aviva, Generali and other insurance companies.
What inspired you to work on climate change issues?
Climate change is an existential threat to us all, so working on mitigating it is an incredible privilege. It also represents ground zero for some of the fundamental questions facing finance: what is the social responsibility of finance, if any? How can financial risk management, the heart of finance, help us manage economic risks? And how can we reconnect finance with the real economy?
What are your work priorities right now?
We are developing stress-test scenarios for climate change and other 'existential risks' (e.g. pandemics) in partnership with a number of insurance supervisors.
I'm also looking at new policy mechanisms that reduce the need for future bailouts in the face of these risks and how they articulate with existing insurance products.
And finally, we're interrogating the question how equity and credit research can pivot towards long-term risk assessment, including through changing the way insurance companies manage research budgets.
Tell me one step the insurance industry needs to take, to improve its response to climate change?
The insurance industry by and large understands the threat climate change represents for future underwriting in many parts of the world. Through scenario analysis, they start to model its effects on future premiums.
But because so much of the insurance sector works off of one-year rolling contracts, somebody building a house in a future flood risk zone won't know the insurance company they work with expects premiums to spike 10 or 15 years down the line.
Of course, climate change response starts with one's own asset portfolio. But the opportunities to drive better decision-making through the nature of insurance – a hallmark of insurance since its invention – remains an underused lever.
Are you optimistic or pessimistic we can avoid the worst effects of climate change?
It took me about 20 minutes staring at this question to conclude that I frankly don't know whether to be optimistic or pessimistic anymore. I just know how truly catastrophic the worst effects may prove to be and so that we cannot but try to avoid them.
What are you doing personally to reduce your climate impact?
In my personal life, I am not the role model I would like to be. I have cut out beef and lamb out of my diet given their carbon footprint, which is an easy way to do better for those that don't have the fortitude to go full vegetarian, but also clearly not enough.
And I ride an electric moped charged with green energy, but I have to admit to my shame I would probably also do that if climate change was not the existential threat it is.