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Swiss Re adopts TCFD’s recommendations for climate-related risks

14th December 2016 - Author: Luke Gallin

Reinsurance giant Swiss Re today announced that it has adopted recommendations published by the Task Force on Climate-related Financial Disclosures (TCFD), which were released today by the TCFD in London.

The TCFD today released its report, ‘Recommendations of the Task Force on Climate-related Financial Disclosures,’ outlining some recommendations for climate-related exposures to become part of mainstream financial filings. The recommendations have been adopted by TCFD member Swiss Re, and the reinsurance entity feels that the new recommendations will promote greater transparency on climate-related risks, which are expected to become more frequent and severe.

The guidelines will also enable users and providers of climate-related financial disclosures, which includes investors, insurers, reinsurers, and lenders, to have the ability to more effectively assess the financial implications of climate change.

“We are just at the beginning of the transition towards a low carbon economy. As a reinsurer that has been researching the effects of climate change for almost 30 years, as a large asset owner and as a long-term investor, we have the chance to step up to the next level and help shape tomorrow’s solutions. There are clear benefits of having more transparency about climate related risks and opportunities,” said David Cole, Swiss Re’s Group Chief Financial Officer (CFO).

In recent times, the potential impacts of climate-related risks on insurers, reinsurers, and the broader risk transfer landscape has been described as both a huge challenge and opportunity for the sector, particularly given the general view among the scientific community that an increase in global temperatures will have a meaningful influence on natural catastrophe events, and will actually account for an increasingly larger share of natural catastrophe losses.

As part of the company’s adoption of the new, voluntary recommendations, which have been issued for public consultation, Swiss Re is set to expand its risk analysis. The reinsurer explained that moving forward it will now include aggregate expected losses from weather-related events, including a description of physical risks from varying frequencies and intensities of weather-related exposures, and also the impact of a 2°C scenario on the business, strategy and financial planning.

Swiss Re’s adoption of the guidelines put forward by the TCFD along with assessing the climate-related disclosures of its clients, will enable the reinsurer to better measure its own transition risks, while exploring the potential impacts of climate-related exposures and opportunities on varied parts of its business.

Being a member of the TCFD Swiss Re actually helped develop the voluntary guidelines for climate-related disclosures, and the reinsurer explains that more data “will enhance how climate-related risks and opportunities are managed,” and contribute to “sustainable, long-term value creation serves as guiding principle for Swiss Re’s actions, supporting the vision to make the world more resilient.”

The TCFD was established in December 2015 by the Financial Stability Board (FSB), and in line with the recommendations Swiss Re will start to publish climate-related financial disclosures in 2017, with a view of increasing what it discloses over time.

Underlining its focus on sustainable and attractive risk-adjusted returns, the reinsurer also announced today that it will transition to Environmental, Social and Governance (ESG) benchmarks for its listed equity and corporate bond portfolios.

Guido Fürer, Swiss Re’s Group Chief Investment Officer (CIO), said; “We were early in realising that, as an investor, ESG factors can offer us potential long-term performance advantages. Furthermore, as one of the first signatories to the Principles for Responsible Investment in 2007, we have been active in the realm of ESG for almost a decade. Today’s adoption of these ESG benchmarks is a clear continuation of our strategy.”

The consultation period for the TCFD report ends February 12th 2017. Discussing the report Mark Carney, Chair of the FSB, said; “The disclosure recommendations will give financial markets the information they need to manage risks, and seize opportunities, stemming from climate change. As a private sector solution to a market issue, the Task Force has focused on the practical, material disclosures investors want and which all capital-raising companies can compile.”

“The Recommendations of the Task Force on Climate-related Financial Disclosures report represents an important effort by the private sector to improve transparency around climate-related financial risks and opportunities. Climate change is not only an environmental problem, but a business one as well. We need business leaders to join us to help spread these recommendations across their industries in order to help make markets more efficient and economies more stable, resilient, and sustainable,” added Michael Bloomberg, Chairman of the Task Force.

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