Frankfurt, - The current
availability of climate change information is insufficient to meet
the needs of financial institutions that increasingly must be
better informed about the physical and economic impacts of changing
weather patterns.  

These are the conclusions of a new study that confirms the
increasing financial relevance of climate change in terms of risk
assessment and avoidance.

The report, sponsored by the German Federal Ministry of
Education and Research, presents the results of an international
survey undertaken by the Climate Change Working Group (CCWG) of the
United Nations Environment Programme Finance Initiative (UNEP FI)
and the Sustainable Business Institute (SBI), Germany.

A total of 60 institutions from all continents took part in the
survey, including both developed and developing countries.

Already today, financial service providers and their customers
are affected by the impacts of climate change, e.g. by extreme
weather events. The survey shows that insurers, reinsurers,
lenders, and asset managers expect these kinds of risks to increase
in the future.

Financial institutions express strong
needs for enhanced access and availability of climate information
in order to further enhance climate change related risk management
within their industry.

Given that financial institutions are able to influence their
clients and investee companies across all sectors of the economy
and throughout geographies, they can play a key role in
accelerating the implementation of adaptation measures by the
private sector more broadly.

To be able to manage climatic risks affecting their business
portfolios and to be able to give advice to their customers,
financial institutions need to improve respective expertise.
Therefore, applied information is needed - in the form of
predictions, analyses, and interpretation - that is relevant for
their decisions.

It needs to be appropriate to the duration of contracts, the
regions where customers hold assets or undertake operations, and
the hazards that are material to the operations of borrowers,
investees, and the insured.

Climate change forecasts and predictions of the resulting
economic impacts will never be perfect and always feature
uncertainty. The better the knowledge and expertise regarding
climate change and its uncertainties though, the better these risks
can be calculated. This will enable insurers, reinsurers, lenders,
and asset managers to price and absorb these risks more
effectively.

This can be crucial not only to the performance of individual
businesses and financial institutions, but to the entire economic
tissue of affected regions as well as the social well-being it
underpins.

The survey identified gaps in the availability of information
that need to be addressed and can be closed by continued research
towards more reliable climate modelling and forecasting, as well as
enhanced translation of scientific knowledge and existing
information into user-oriented information. Such efforts are likely
to require more intensive collaboration between users and
suppliers, public and private actors, scientists and decision
makers.

“To date the key role that
financial institutions and other private sector decision-makers can
play in increasing the climate resilience of economies and
societies has been neglected at best.” Paul Clements-Hunt, Head of
UNEP Finance Initiative.

“The rapid reduction in greenhouse gases and the adaptation to
the unavoidable effects of global warming need to go hand-in-hand
if we are to cope with the climate challenge,” said Paul
Clements-Hunt, Head of UNEP Finance Initiative.

The study is a first step in identifying what is needed so that
financial institutions can start playing their important role in
accelerating the shift to climate-resilient economies.

“This survey shows that Financial Institutions are concerned
with the potential impacts of climate change and that they see the
need to react and respond to such changes through the systematic
integration of climate change factors into their decision-making,”
said Mark Fulton, Managing Director at Deutsche Bank Climate Change
Advisors and Co-Chair of UNEP FI’s Climate Change Working Group
(CCWG).

“We need these services as a common reference framework for our
investment decisions in renewable energy and infrastructure
projects and other purposes. With our improved climate expertise we
can support our clients to adapt to climate change and manage their
risks,” he added.

 “We welcome the initiatives of the German Government, UNEP
and others to strengthen climate information services. We need
these services as a common reference framework for our investment
decisions in renewable energy and infrastructure projects and other
purposes, said Stefan Löbbert, Head of Corporate Sustainability
Division at HypoVereinsbank (Member of UniCredit), Co-Head of
“Climate Change Finance Forum”, Germany.

The study confirms that what is needed
now is objective and reliable information. We need to work towards
enhancing the access of private sector decision makers to climate
information as well as, most importantly, increasing the accuracy
and granularity of  climate models.

“As a leading insurance group we can observe in our data base in
some regions a change of loss patterns from weather catastrophes in
the past decades. To secure risk transfer to the private insurance
sector in the future, the understanding of potential impacts from
climate change on losses from atmospheric perils is essential,”
said Ernst Rauch, Head Corporate Climate Centre at Munich Re.

The relevance of climate data and their interpretation for
business purposes will play a more and more important role in the
future”The development of climate change expertise within the
financial sector is economically relevant. For some institutions,
this is a success factor already today,” said Paschen von Flotow,
Sustainable Business Institute (SBI).

“The fact that this dialogue is now being extended to the
international level through the collaboration with the UNEP Finance
Initiative offers an excellent outlook,” said Wilfried Kraus,
Deputy Director General of Directorate 72 “Sustainability, Climate,
Energy” at the Federal Ministry of Education and Research
(BMBF).

The United Nations Environment Programme Finance Initiative
(UNEP FI) is a global partnership between UNEP and the financial
sector. Over 190 institutions, including banks, insurers and fund
managers, work with UNEP to understand the impacts of environmental
and social considerations on financial performance.