Finance sector suffering from lack of climate data

Investors and financial institutions urgently need more developed information services to provide them with data on global warming and changing weather patterns.

That’s the conclusion of a new survey by the United Nations Environment Programme Finance Initiative (Unepfi), which says banks, investors and insurers need better access to climate information to enhance their risk management.

Unepfi believes the need is particularly pressing given the influence that financial institutions and investors could have in accelerating the implementation of technological, economic and social climate adaptation.

The report, based on responses from 60 institutions in developed and developing countries worldwide, says progress ‘will only be possible through co-operation between the research community, the finance industry and other private- and public-sector institutions’.

Most respondents expected direct and indirect climate risks to become increasingly relevant for the financial sector, and said the reliability of advice and predictions, locally and regionally, will be the most important factor in responding to these risks.

However, there was a dearth of user-friendly information, especially in the shape of long-term forecasts, and particularly in developing countries. Almost all the participants said they were ready to work with data providers and research bodies.

Ernst Rauch, head of the corporate climate centre at the German insurance company Munich Re, said: ‘As a leading insurance group we can observe in our database 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. The relevance of climate data and its interpretation for business purposes will play a more and more important role in the future.’

The general need for improved climate change research and data has been highlighted lately, but this is the first research into the international finance industry’s particular needs.

Unepfi recently co-ordinated a statement by the world’s largest banks and global investors calling for determined policy action on climate change by governments so that financial institutions and other businesses have a clear lead on what they should be doing.

The investors and banks, responsible for the management of funds the size of US GDP, said policies are urgently needed to unlock ‘the vast potential of low-carbon markets and avoid economic devastation caused by climate change’.

The statement, drawn up by Unepfi’s climate change working group, was signed by 259 investors from Asia, Africa, Australia, Europe, Latin America and North America. It was supported by banks such as Allianz and HSBC.