Swiss Re has underlined the “urgent need” for orderly climate change transition plans that invest more into renewables, as the energy crisis in Europe threatens to give rise to ‘fuel poverty’ and increase social tensions.
In a new report, analysts note that energy prices have skyrocketed in recent weeks, as shortfalls in supply have coincided with a surge in demand for energy to power the global economic reopening after COVID-19.
Winter is likely to intensify the crisis, Swiss Re, warns, and the situation is weighing on Europe’s near-term economic outlook, adding inflation pressure particularly in the UK and creating negative second-order effects due to higher energy bills.
According to the reinsurer, central banks have limited ability to resolve this shock and are likely torn between whether to address rising inflation or slowing growth, and governments face a delicate balancing act to prevent rising energy prices from heightening social tensions.
But, as a provider of risk transfer capacity, risk knowledge and long-term investment, Swiss Re believes that the re/insurance industry can help to alleviate the crisis by facilitating the transition to a low-carbon economy.
For instance, the development of green technologies and construction of new energy infrastructure, including carbon capture and storage, will create new insurance and investment opportunities.
And, more broadly, a commitment to a net zero asset and underwriting portfolio, and PPPs with sustainability criteria at their core, can help to nudge global stakeholders towards a greener future.
“What does this crisis teach us? The energy crisis doesn’t call the need for more climate actions into question, but it shows that the transition can be very painful and is complex. Today’s energy shortfalls are in part an unintended consequence of the multi-year global push to reduce reliance on fossil fuels, while renewable energy capacities have not been ramped up fast enough and are still vulnerable to volatility,” Swiss Re stated.
“Much more investment in renewable energy supplies is needed as the world reduces its reliance on fossil fuels. This will add pressure for more concrete actions to be decided at COP26, the annual UN climate change conference.”
