No more kicking of the climate can down the road; time to play a different game
Last year, like many others, I contracted COVID. The virus has scarred my lungs and affected my health in irreversible ways, something that I am learning to adapt to and accept. And yet, despite my proximity bias, I deem climate risk existentially by far more threatening for society and mankind than COVID.
The pandemic has clearly been a great shock to society and the global economy – but it pales in comparison to the long-term impact of climate change. As with the pandemic, no country will be immune to its physical and economic consequences; the urgency and global coordination seen in the battle against the coronavirus needs to underpin the efforts to curb carbon emissions. A science-informed, globally orchestrated and timely response strategy is the key factor to succeeding in adapting and progressively removing carbon from our atmosphere.
We will all bear the cost of any protracted inaction
The recently published Swiss Re Institute Economics of Climate Change report reveals how continued failure to respond to this risk comes at a cost to all of us. Based on our current emissions trajectory, the world economy could be on average 10% smaller by 2050, Asia will be disproportionally affected; earmarked as the engine of global growth, SEA economies may shrink by 25% if we fail to deliver on the Paris Agreement targets.
This problem is too big for any one country or company to tackle alone but roadmaps do exist and are getting continuously refined and improved, with a marked acceleration in the last 12 months.
At Swiss Re, we have identified four key pillars where systemic intervention is needed: reduce direct emissions and decarbonise all of our business; support carbon removal through industrial pathways; expand and secure carbon removal via natural pathways; and adapt to and minimise consequences from the irreversible climate damage already locked in.
Within businesses and across the globe there are varying levels of activity, success and optimism under each of those pillars – but we have a collective responsibility to tackle all of them. There needs to be meaningful and coordinated action entrenched at all levels of the public and private sectors.
Creating a united front that recognises individual priorities
Commitments made under the Paris Climate Agreement do share a common goal to work towards, but each party is following its own elected route and progress around the world has been faltering.
Pockets of innovation are encouraging, and many countries can point to examples of action in individual cities or sectors. What is lacking is the impetus and direction to scale up projects and achieving real outcomes that reverse the relentless march of carbon emissions.
The recently refreshed EU strategy on adaptation to climate change encapsulates; the moral tone, set of priorities, tools, funding, enabling mechanisms and the clear expectation that each nation of the Union shall drive with direct accountability and demonstrate through regular reporting. That is undoubtedly progress, however, national adaptation plans are still developed independently; furthermore, whilst benchmarks will be produced, there is no focus on a defined outcome. Enforceability may be problematic because a minimum standard of deliverables has not yet been defined.
And of course, the public sector in any given country is not a unified body. Views and priorities will differ across ministries and agencies, so whilst we are progressively closing chasmal knowledge gaps, actions are poised to remain fragmented and decisions taken in isolation - unless a different scale and mode of coordination is inserted by design.
It is also important to remember that every country has its own challenges. Some might be concerned about the risks of transitioning to a low-carbon economy if their GDP is powered by oil and other hard to abate sectors. Others might be grappling with how more extreme and frequent droughts and flooding will impact on their agriculture sector and the livelihood of large segments of their population.
Whilst we need to share best practice, technology and financial innovation globally, we also must recognise that their application and uptake should not be mandated and will vary.
No excuse for no game plan
Equally, the public sector must raise the stakes and strive to deliver novel economic development and industry plans, a suite of policies and regulation to support the early adopters and progressively raise the bar, whilst sweeping up the laggards. Climate change may result in some winning more than others, but we cannot have losers concentrated in critical economic sectors, otherwise we all lose.
It is incumbent upon governments to take steps to ensure these policies are both equitable and firm so that all sectors of the economy and segments of the population can experience an orderly and bona fide transition as possible. We know from past experiences that clear market signalling works to unleash innovation, competitive market forces and mobilise private finances; take the example of renewable energy markets. On the other hand, the instability and economic fallout associated with a disorderly transition doesn’t provide any incentive to make greener choices or bet entire business models, especially when margins are already wafer thin.
Fundamentally, we need a paradigm shift: many of the measures needed are still being thought of as voluntary expenses, when they are in fact a necessary and urgent investment to stave off even worse impacts than we are seeing already. The idea that we can take another year to commit, and ten more to execute is nothing more than kicking a bomb, not a can, down the road. Are we sure we want to give it another kick?
The decisiveness underpinning the Biden administration’s action on the Paris agreement is inspiring, likewise the decarbonisation commitments from China and Japan have brought Asia into the global debate and will inject unprecedented momentum. All the countries currently sitting on the side-lines need to make their commitments to work in step with others.
Shifting society’s perception of risk
Electorate sentiment polls are unfortunately not the right place to derive the appropriate course of action. When it comes to shaping thinking in both the public and private arenas, insurers have an important role to play. As an industry, we are at the centre of society’s understanding of risk. We can be leveraged through public-private partnerships in ensuring new technologies and nascent sectors of the economy – such as hydrogen fuel or direct carbon capture – become a reality.
We can be long term partners of governments, creating confidence and building alignment with the banking sector and long-term investors, supporting the roll-out of technologies and infrastructure better suited to the changing climate landscape.
We do not need to be sold on the mission: we stand to benefit from a more predictable, sustainable future as much as we stand to suffer from a chaotic, spiralling one.
Uniting the public and private sector in action now is the best way to secure economic and social prosperity for the future. No more kicking of the can; time to play a different game.