Banks Say Tackle Climate Change or Face the Consequences

Banks Say Tackle Climate Change or Face the Consequences

Oct. 14, 2002 - Natural disasters driven by climate change could wreak havoc across the world’s stock markets and financial sectors, annually costing US$150 billion in the next 10 years, says a group of nearly 300 financial organizations.

The United Nations Environment Programme (UNEP) Finance Initiatives, which consists of 295 banks, insurance firms and investment companies from around the world, is calling on governments and the financial sector to take climate change seriously or face the consequences.

The financial industry not only needs to take the effects on business of a carbon constrained future into account, it also has an obligation to contribute to finding a solution using their investment and business expertise, says John H Fitzpatrick, Chief Financial Officer and member of the Executive Board of global re-insurer Swiss Re. "The problems associated with environmental disasters quickly become measured in dollars and cents," said Fitzpatrick.

The financial services sector currently has US$26 trillion in assets under management, giving it considerable clout. Assistance can be given through leading companies by example – for instance, with the financial sector reporting on their greenhouse gas emissions; by providing services that promote emission reductions; and by raising awareness.

Solutions could include commercial banks fully pricing risks from climate change in loan agreements, and giving incentives to schemes that encourage energy efficiency or cleaner fuels. Asset managers should also request information on carbon emissions from the companies in which they invest.

Last year, the UK’s Chartered Insurance Institute, which has 60,000 members within the industry, called for firms to make use of their power over oil companies in order to aid Kyoto Protocol initiatives. Insurance companies have started to take note of the effects of climate change, with the German Munich Reinsurance Group recently announcing increasing its premiums partly due to changes in the climate.

Fortunately, there are opportunities that financial organisations can take advantage of, say the Financial Initiatives members. One of these is the growing market in greenhouse gases, which could be worth as much as US$2 trillion every year by 2012. The market for clean energy could also be as much as US$1.9 trillion by 2020, says the report.

In September, edie reported that a leading European investment company had criticised banks for failing to assess environmental risks of projects and companies requiring funding.

The full UNEP Finance Initiatives report is available to download from the UNEP Finance Initiatives Web site.