Dec 11: Climate Change Reality Check? Ask the insurance and banking industries

Insurance and banking are both interested in risk protection, so we need look no further than where those industries are headed to understand how seriously “the money” takes climate change.

Property insurance is getting more and more expensive.  For some it will be simply unaffordable. For the first time climate change was named as Top Risk in that industry’s Emerging Risk Survey.

According to Fast Company article (link below) “Businesses are being encouraged to integrate climate adaptation and resilience into the design of their buildings, from waterproofing to relocating essential equipment to installing wind-resistant roofing to scrapping a risky location and moving somewhere safer.” Some are balking at the cost while others are seeing the ultimate wisdom in this course.

Thoughts on this were spurred by reporting on a letter from some House Republicans to Fed Chairman Powell objecting to potential inclusion of climate change as part of stress tests for regulated banks. This is also during a period of time when the Fed is considering joining the Network for Greening the Financial System (NGFS). (The United States is notable in its absence https://www.ngfs.net/en/about-us/membership). In their letter the House members, rather than attribute climate change, they state “enhanced risks to insured property could also be attributable to poor local zoning standards and building policies that increase the density of commercial and residential structures.”  Ultimately, the concern they raise is protection of coal, oil and gas companies. 

Once again, we see short-sighted, narrow profit protection for some industries versus long-viewed sustainability and broad protection for the economy.

https://www.fastcompany.com/90582295/climate-change-is-threatening-your-companys-building-insurance-wont-be-enough-to-protect-it

https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report

https://www.soa.org/globalassets/assets/files/resources/research-report/2020/13th-emerging-risk-survey-key.pdf

https://www.politico.com/news/2020/12/10/republicans-federal-reserve-climate-regulation-444194