Some of the Asia-Pacific’s brightest minds in climate change risk management met last week to discuss how the financial services industry can effectively identify, assess and manage climate-related risks.
CoreLogic assembled a panel of influential experts from Australia and New Zealand for its virtual event Moving ahead on climate change: Tackling climate risks in financial services, with participants reaching the consensus that cross-sectoral collaboration would be key to effectively managing impacts of climate change.
The panel was comprised of moderator Dr Tanya Fiedler, from The University of Sydney & Sydney Environment Institute; Dr Pierre Wiart, Head of Consulting and Risk Management Solution at CoreLogic Australasia; Ernst Rauch, Chief Climate & Geo Scientist at Munich Re; Australian Sustainable Finance Initiative Co-Chair Jacki Johnson, Co-Chair; Insurance Council of New Zealand CEO Tim Grafton; and Pollination Executive Director Zoe Whitton.
Participants discussed some of the key challenges and issues facing the finance sector as a result of the looming climate crisis, including how systemic risk from climate change could affect industry sustainability; how different sectors within the financial services are tackling climate risk; and challenges with the use of climate models by business for the purpose of assessing climate physical risk and how these challenges can be managed.
They also ruminated on how climate information could be translated into easily usable data and insights.
CoreLogic GM of Financial Services & Insurance Solutions Milena Malev said climate hazards presented systemic risks to the economy, strategy and governance.
She said the increase in both the severity and frequency was no longer temporary and had now become “close to permanent”.
“There was consensus across our panel that cross-sectoral collaboration will be key to effective management of the impact of climate change. Responsibility is shared,” Ms Malev said.
“The flow of information between different collaborative parties, between research and scientific communities, industry including banking, insurance and investment, government and regulators, and even consumers, is what’s important.”
The panel agreed that when it came to physical risks, there were actions businesses could start acting upon now to better understand their risk exposure, including looking at the possible impact of climate change on real assets and portfolios down to the property level, or even at a postcode level.
“The panel acknowledged while there’s still some work to be done in transition risk and modelling compound events, tools, software systems and data is already available and being most effectively utilised by the insurance and reinsurance sector,” Ms Malev said.
“Now is the time for bankers and investors to follow suit. Many different outcomes can be achieved with the data; not just assessing a loan, but also to help comply with regulations, conduct portfolio stress-testing and follow it through time and ultimately, connect with customers to ensure their awareness of the risk exposure of their property or physical asset.
“For example, Munich Re’s knowledge of natural hazards, combined with CoreLogic’s rich property data and attributes, is bringing the evaluation of property risks to life.”
The panel agreed that both Australia and New Zealand were on top of trying to co-operate and address climate change when it came to the regulatory environment, which Ms Maev said was “very encouraging and positive”.
“It’s accepted by the industry that more needs to be done to integrate the discussion between government, regulators, industry and consumer; becoming more client-centric, understanding the problem but also sharing the knowledge if it exists.”
She also said community education was something important to consider when assessing how to move forward with addressing climate change.
“The role should be shared between banks, insurers and customers,” Ms Malev said. “Transparency between these three parties will provide stability for everybody.”
