Climate resilience: how insurance can contribute to a new, "green" dawn

Re/insurance is at the front line of mitigating climate risk and facilitating sustainable growth. Re/insurers can contribute to the UN's 1.5°C target from both sides of the balance sheet and help drive a unified policy framework for green transition.

Climate change is a systemic risk that impacts the financial industry also. The Economist Intelligence Unit estimated that USD 4.2-13.8 trillion of the world's financial assets in 2015 were at risk from the impact of climate change. Calls to address climate risk and build a robust green financial system are becoming ever louder. According to OECD estimates, if a "decisive transition" to a low-carbon economy is effectively implemented, climate-change associated damage to economic value will be reduced to the tune of 2% of the gross domestic product of the G20 nations. It will also boost long-run output by up to 2.8% by 2050, resulting in a net growth benefit of 4.7% across those countries (see Figure 1-1).

Driving this value creation will be investments in sustainable infrastructure, supportive fiscal initiatives, structural reforms and green innovation, like a capital market for green securities. Insurers can contribute to the new green dawn by applying climate adaptation underwriting measures and environmental, social and governance (ESG) criteria into their investment portfolios.

Key takeaways

  • Tackling climate risks could lift G20 GDP growth by 4.7% by 2050.
  • Insurers can contribute to climate resilience through environmental-friendly underwriting guidelines.
  • Incorporating ESG criteria to investment process supports long-term economic growth.
  • Green bond issuance is at record highs but is still just 0.5% of global bonds in circulation.
  • A harmonized "taxonomy" of what is green and sustainable is needed to further advance climate resilience.

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Economic insights Climate resilience: how insurance can contribute to a new, "green" dawn

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