The increasing frequency of extreme weather events will likely cause further disruption of ecosystems and food systems, as well as an increase in diseases. This could potentially undo the remarkable progress Asia has achieved in the past few decades in economic, social and human development. The profound risks and impact associated with climate change go way beyond environmental and economic damage, as it can even undermine some of the social determinants for good health, including livelihoods, education, food security and access to healthcare and critical social support structures.
In Asia, developing countries with fragile social and health infrastructure may struggle to cope with the elevated risks, and without effective adaptation and mitigation measures that are implemented elsewhere in the world, Asia stands out as being more exposed to these physical and transition risks.
Climate science tells us that global warming over the next decade will happen due to past emissions, which suggest that rising socioeconomic impacts are a virtual certainty. At Allianz, we recognise the growing pressure and urgency for policymakers and businesses alike not just to identify climate risk in Asia, but to shape the future of sustainability in the region by drawing up and implementing effective responses for adaptation and mitigation.
Insurance and finance can advance sustainability through decarbonisation
The transition to net-zero requires a joint effort by all societie, and the impetus is on governments, public institutions and businesses to address and facilitate this process. Insurance as the most basic form of risk management has always played a crucial role in minimising and transferring risk, but it can also do more to advance the delivery on decarbonisation targets.
As a founding member of the United Nations-convened Net-Zero Asset Owner Alliance, Allianz took the pledge to help facilitate the decarbonisation of the economy. For the insurance industry, the major concern regarding climate change has already evolved beyond individual natural disasters or catastrophic events to encompass the relationship between human society and the global climate ecosystem at the fundamental level.
Finance can either be the enabler of, or the constraint to achieving climate goals. Capital misallocated at a systemic level can cause further threats to financial stability and social equality. For the net-zero transition to occur at the speed and scale required, insurers and the wider financial services industry must step up to back the various pathways to a low carbon economy. This includes the shift from fossil fuels to renewables, decarbonising industrial operations, advancing carbon capture, utilisation, and storage, transforming agricultural and forestry and electrifying daily life.
The transition process will inevitably lead to changes in our economies. In our dual role as insurers and investors, we can help identify, guide, and capture these trends. We believe it is possible to realise positive externalities for society while achieving successful business outcomes through intelligent and diligent deployment capital in the form impact underwriting and impact investing.
Building resilience in Asia
The world is facing economic and social headwinds as it emerges from the COVID-19 pandemic, putting the pursuit of long-term climate objectives at risk. It is imperative for national governments to join hands at the upcoming COP27 conference and use it as the impetus to develop comprehensive policies and frameworks.
The objective of COP27 is not only to reduce emissions to meet climate objectives, but in the process also help build resilience into our societies and economies.
The glaring insurance gap in Asia remains one of the challenges in building up the region’s resilience against climate-related physical and transition risks. At the Allianz Asia Summit held in October, sustainability experts and senior leaders from across the regional operating entities in Asia gathered in Singapore to advance Allianz’s localised sustainability strategy in Asia.
The shaping of our sustainability agenda in Asia, and its seamless and effective integration into Allianz’s global insurance business and investments requires collaboration at every level. Our international network ensures that sustainability-related learnings from one part of the world can be transferred to other regions, and the collective experience can help Allianz spearhead decarbonisation efforts in the financial industry.
Sustainability strategy tailored for Asia
Allianz is at the forefront in integrating sustainability practices into its business and providing insurance solutions that aim at supporting the decarbonisation of Asian economies. Allianz’s sustainability strategy is fundamentally rooted in two pillars, integrating sustainability into every aspect of the organisation and business operations, and be a shaper of sustainability in the markets it is present in, across environmental, social and governance matters.
As a leader in sustainability, Allianz has sought to understand its business impacts and take its responsibilities seriously across a wide range of issues that are important to society and to the planet. We seek to act as the catalyst for a more sustainable future, by offering products and solutions that bring positive climate and societal impact across the different businesses of the group. The growth of our sustainability track record and knowhow relies on the deep understanding of the opportunities and challenges unique to each individual market.
We need to reduce emissions but also ensure that the world becomes a more resilient place. This means shifting our portfolios (investment and insurance) to net-zero pathways, using our capabilities and expertise to ensure we can support our clients to become more resilient to the threats they will face tomorrow and already face today; and provide the right insurance solutions for them.
In Asia, insurance has a crucial role to play in minimising the impact of intensifying climate risks. The protection gap is detrimental to the overall resilience of the industry and of society. The onus is thus on the industry to provide insurance solutions that go beyond traditional risk transfer to address risk mitigation explicitly and close the gap on infrastructure financing.
Much of Asia is already responding to the adaptation and mitigation challenges of climate change. By building on those efforts, sharing best practices and galvanising support, Asia can emerge as a leader in one of the most monumental challenges facing the world. Despite the challenges that lie ahead, Asia is well positioned to meet the challenges and capture the opportunities. A
Ms Line Hestvik is chief sustainability officer with Allianz.