On Wednesday 21st September the ABI hosted a ‘climate clinic’ which brought together representatives from across our industry – particularly from smaller and medium size firms – to participate in a ‘speed networking’ event.
Members and specialists from KPMG, with whom the event was in association with, debated and discussed the big areas and developments for financial services in making net zero happen – and ESG more broadly.
This of course is an incredibly big and somewhat daunting topic, and so it was incredibly valuable to take something of a step back to hear what the issues and challenges facing a wide variety of our members are, rather than discussing the specifics and details of the latest government strategy, regulatory consultation or international initiative.
Whilst the conversations were very much open to whatever topics members considered most pressing, broadly the themes can be categorised into five topics:
- Risk Management, climate modelling and scenario analysis
- Strategy, transformation and stewardship
- Taxonomy, Data challenges, ESG ratings
- Regulatory reporting in the UK landscape
- Beyond the ‘Emissions’ of ESG – namely, biodiversity and social considerations
Perhaps unsurprisingly, a lot of the issues faced by members boiled down to data availability and quality. This was raised time and time again in a variety of context, whether that meant looking at data availability more holistically across the entirety of a firm, or specifically how to translate aggregated, assumption-based data into meaningful and decision-useful information to understand a firm’s particular underwriting activities.
For us at the ABI, this re-emphasised the importance of data and disclosure regulation to ensure that firms are able to be confident they are comparing like with like, as well as to reduce the reporting burden on firms themselves – insurers are, after all, both users and preparers of disclosures.
The crucial importance of a consistent and appropriate regulatory environment was also reflected upon when participants considered the prudential regulation regime, particularly in the aftermath of the Bank of England’s recent Climate Biennial Exploratory Scenario (CBES) and as we approach the Bank’s Climate and Capital conference in October.
Whilst this blog may not be the appropriate place to launch into the specific details and nuances of firms’ views on the appropriateness and challenges of the introduction of additional capital requirements to address the financial risks posed by climate change, it was clear that the industry is viewing this subject as one which will only continue to increase in prominence and importance, and one which the ABI and industry more broadly intends to fully engage with.
Members who attended were also able to compare their experiences of implementing an internal strategy for sustainability and climate change, where it was acknowledged that this needed to be embedded in the day-to-operations of firms, rather than only viewed as a project for sustainability specialists. One aspect of this that came up during several discussions was the need to balance reducing a firm’s exposure to climate risks with a pro-active approach to designing products or services that helped customers reduce those risks.
We would like to once again thank all the members who participated in this first of its kind event and for contributing to such a rich discussion. As a trade association we are always looking to deepen our understanding of the issues facing members, and so if you have any feedback or questions on this event – or indeed on any other climate-change related work of the ABI – please reach out to Ben Howarth or Rebecca Lea.