At the United Nations climate change conference in Paris late last year, we witnessed something new. It was the first time where businesses took the lead to convince world leaders to commit to climate change targets. It used to be other way round where politicians and policy makers led and we simply followed them. I found it encouraging to see more and more business leaders asking ourselves in unison, “What can we do to fight climate change and how do we do this?”
Allianz is both an insurer and an investor. On the insurance side, we need to make the unknown known and explain what climate change risks are to society at large. For instance, we must continue to spell out the risks of building communities in unprotected coastal areas or in areas that are drought-prone.
Secondly, the insurance industry can help. Climate change is one of the biggest causes for social unrest and distress in parts of the world where communities which rely on agriculture have no means of dealing with any catastrophic weather conditions. Allianz is part of RIICE which is an initiative that uses satellites to monitor crop growth and helps to establish insurance for farmers in areas where we were not able to provide efficient solutions in the past. Through our insurance solutions, we can show how we protect businesses and communities against climate disasters. But the insurance industry cannot do this alone. We need the support from governments. In many countries, there are no legal frameworks which will enable us to help them. We are working very hard to further governments’ understanding of why and how public-private partnerships can help their most vulnerable communities.
As an investor, we are not only divesting from coal. We are doing more to be a responsible investor on behalf of our customers. In 2016 we will start applying 37 criteria to our €650 billion of insurance assets. We will be closely monitoring transparency, corruption and sustainability of business models, amongst others, in our investments. We will not invest in business models where we can’t see a sustainable future. Incidentally, we would like to see more regulatory support to allow long-term investors to invest in clean energy. For example, today, if we want to invest in a sustainable energy start-up, we have to set aside 50% of our investment to risk capital. Regulators and policy-makers want a safe and secure financial system –which we are fully committed to - but they can also make it easier for investors to pursue sustainable energy investments.
Approaches such as ours will hurt the fossil industry but we also need to give them time to adjust to the new environment they find themselves in. It is not our role to decide what the right business model is. I am not saying that we won’t invest in oil and gas ever. There is a huge difference between efficient gas plants and turbines and inefficient ones. If there is a collective will, we believe that there will be ways to make existing coal plants less polluting than they are today.
Overall, businesses, world leaders, policy-makers and other interested parties need to prioritise what actions we must take collectively and agree a time framework to execute these actions. If we have constantly changing targets and priorities, nothing will happen and we will fail the people who need our help most. On the whole, people are willing to explore different options to curb the devastating effects of climate change as well as do their part to be more responsible consumers. Politicians can also do the same: stop responding to catastrophic events with one eye on upcoming elections but adopt a long-term vision and plan to counter climate change risks.