The insurance industry must “drive the pathway to net zero”, explained Dame Susan Rice in a fireside chat

The finance sector needs to drive capital towards climate solutions. During a fireside chat with Dame Susan Rice, chair of the GEFI Global Steering Group, Christian Kunz, chief strategy, innovation and ventures officer at the DIFC, explored how innovation on products and ways of doing business can help finance the economy of the future.

As the UAE gears up to host this year’s COP28 meeting in Dubai, Kunz began by asking Dame Rice for her takeouts from last year’s COP27 in Egypt.

She said there had been a big focus on loss and damage as well as the inequalities between the ‘global north’ and ‘global south’.

There is a feeling that while the industrialised north is seen to have created the greenhouse issues that are contributing to a changing climate, the financial support promised to nations most exposed to the ravages of climate change have not materialised.

She noted the opening speech at last year’s COP had described the climate state of emergency as a “pathway to climate hell” and said there was a much greater sense of urgency around the need for action.

“We’re not going to solve these problems unless we pay attention to the entire world,” she said. “We’ve left that urgency on the table.”

Coming out in force

On a more positive note, COP27 was the first time that financial institutions had come out “in force” and attended a COP.

“We need to hear more from financial institutions,” said Dame Rice. “What everyone is doing to make this work and what we should look for from the upcoming COP.”

We also need access to better data, but it has to be “good and honest data”, which is independently validated. There must be more honesty between all stakeholders to avoid ‘greenwashing’. “Companies often don’t know that’s what they are doing,” she added.

The creation of sustainable taxonomies is important, added Dame Rice. There are too many different interpretations, and we need clearer wordings and benchmarks to measure progress and to “talk to each other properly”.

Embedding sustainability into culture

Such definitions can help everyone in the organisation better understand why sustainability is important.

“Businesses are driven by people,” she said. “We need to train everyone to understand what this new world is about and what sustainability really means.”

“Organisational culture is really important. We need to make sure sustainability is admired.”

Another important enabler of the climate transition is innovation. “Innovation in finance is happening in spite of us,” said Dame Rice. “The democratisation of finance widens access and deepens the activities people are involved in.”

A role for insurance

Inevitably the transition to Net Zero involves new technologies, which bring with them new and emerging risks.

The use of solar panels is becoming more widespread in various parts of the world, as one example, but that can impact fire risk. The insurance industry “will need to help us understand and balance that pressure”, said Dame Rice.

The insurance industry is in many ways on the frontline when it comes to influencing how we tackle the climate crisis, she thought. Insurers have the “ability to influence and force change,” and she urged the industry to be “more front and centre as an industry”.

Kunz pointed out that it was not possible for insurers to suddenly withdraw coverage for clients that are heavy emitters. Instead, the industry must “drive the pathway to net zero” by incentivising its insureds to make clear progress on their own sustainability journeys.