Interview with Michel Liès: A better climate for growth

In its new report Better Growth, Better Climate, the Global Commission on the Economy and Climate challenges us to reframe the global debate about economic growth and climate change. A member of the Commission, Swiss Re CEO Michel Liès shares his views on the new climate economy.

Q: Many still believe it's impossible to combat climate change without compromising economic growth. As a member of the Global Commission on the Economy and Climate, what is your key takeaway from the report?

A: The goals of achieving economic growth and reducing climate risk are by no means in conflict. We do not have to choose between them. In fact, sustained growth cannot be achieved unless we address the risks associated with climate change. To realize growth opportunities, governments and businesses must therefore actively manage climate and other environmental risks and incorporate them in their economic and development strategies, as well as in their investment decisions.

Q: So how can these growth targets be achieved?

Swiss Re CEO Michel Liès

A: We must invest in growth that boosts economic performance but is also inclusive, resilient and climate friendly. Consider this: According to the report, capital investment of around USD 100 trillion is needed over the next fifteen years to deliver sufficient economic growth for a growing population. This is a big sum. But the additional net investment needed for low-carbon infrastructure represents only USD 4 trillion or about 4% of this total. These costs could be partially or fully offset by other savings in a low carbon economy, for example reduced fuel use.

Q: What kind of investment are we talking about?

A: More investment in infrastructure is essential for growth in most economies today. Globally, an estimated USD 6 trillion is needed per year. To generate growth and cut back emissions, however, it is important that infrastructure is both of high quality and low carbon, particularly when it comes to energy, transportation and buildings. As an institutional investor, the insurance sector is already looking into such opportunities.

Q: Speaking of the insurance industry, you mentioned the need to consider climate risks in decision making. From your experience, what are they?

A: Losses from natural catastrophes are on the rise. Annual insured losses from weather-related events have jumped more than five-fold over the last 40 years, from USD 5 billion in the 1970s and '80s to USD 27 billion in the last twenty years. So far, the main driver has been economic development leading to a higher concentration of values in exposed areas. But climate change will aggravate the situation. If unmitigated, it could cost the world economy around 20% of global GDP by the end of this century. If growth targets and climate risk are not addressed together, most countries will experience poor economic performance, and climate risks will grow until they become unmanageable.

Q: Most of the damage from natural disasters is uninsured, which represents a growing financial burden for governments and societies. How can this situation be improved?

A: At Swiss Re, we have taken steps to help decision-makers understand the climate risks faced by their communities and implement effective climate adaptation strategies. Insurance plays an important part in strengthening disaster risk resilience because it provides a mechanism to compensate affected parties for damages incurred. It also incentivizes investments in physical protection measures by putting a price tag on risk. This is nowhere more urgent than in our cities, where most of the world's population now lives and which act as hubs for the global economy. To support such efforts, we've provided expert risk advice to the city of New York and teamed up with the Rockefeller Foundation to promote its 100 Resilient Cities initiative. The public sector is increasingly interested in comprehensive risk management approaches and new solutions to finance disaster losses.

Find out more

Download Better Growth, Better Climate (PDF, 14.19 MB).

Published 16 September 2014

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