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May 2021

Collaboration to manage the financial impacts of a changing climate

Source: Asia Insurance Review | Jul 2020

Aon is collaborating with The Climate Service (TCS) to help clients understand and manage climate risks today and into the future.
Financial regulators across the world, including in Canada, the EU, Hong Kong, Japan, Singapore and the UK are setting guidelines to manage the effects of climate change on financial stability and build on the work of the Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures (TCFD). This further compels businesses to measure and manage climate risk but often they do not have the tools to quantify the key parameters. 
COVID-19 has tested the resilience of economies and is providing a good example of how systemic changes can impact financial, economic and social stability. To prepare companies better across all sectors for the impact on climate, Aon has entered into an exclusive broker relationship with TCS that combines science and technology to measure, monitor and manage the financial impacts of climate on business and investments. The combined service brings together complementary analytics with a climate focus and comprises:
  • Scenario analysis: Firstly, client data such as property location, type, value and greenhouse gas emissions are uploaded to TCS’s platform. It then runs different climate scenarios to explore the impact of physical risks such as changes in temperature, flooding and wildfire as well as ‘transition’ risk including shifts in carbon pricing, law and reputation – which are aligned to the TCFD framework.
  • Customised recommendations: Aon’s analysts interpret the data to create a customised risk framework with actionable recommendations, outlining how changes in financing strategies can help mitigate climate-related impacts.
  • Balance sheet optimisation: Next, Aon will look to optimise the client’s long-term balance sheet resilience using capital through risk transfer and/or asset placement. Aon will also explore new capital solutions where the platform has raised challenges that are not addressed by traditional markets. A 
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