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Ask Camelot: “Climate-Related Risks – When will it be too late for financial firms to act?”

As we’ve heard before, there is no planet B, but climate-change does not mean the end of the world as we know it – if we can all implement changes in our way of life – nor should it stand as a roadblock to the growth of your company, if you take advantage of the right solutions. In Camelot Live’s latest instalment of Ask Camelot, our Sustainability Think Tank explored how the financial services industry should respond to climate-change. Here, expert Camelot members share their advice and guidance for how organisations within the industry must shape their efforts around climate-change policy and regulations.

An appropriate response to climate-change from the financial sector has never been more pertinent, as was highlighted by Roelof Coertze, a qualified actuary who is passionate about climate-change. Several nations have made commitments to increased sustainability over time, not least of all China, which has set a target to go carbon-neutral by 2060. Of course, nations are not the only major stakeholders in this shift to sustainability. In regard to why financial services companies should be actively reacting to climate-change, Roelof identifies relevant regulatory publications to guide the actions of companies across the globe, while emphasising the growing pressure on such companies to act responsibly.

AUDIENCE POLL:

Is your firm discussing and embedding the expectations of the ‘Dear CEO’ Letter?

Yes: 44%

No: 11%

We were not aware of this ‘Dear CEO’ letter: 44%

Due to the time constraints, with the PRA setting a deadline for the end of 2021, it is fundamental that organisations embed the guidance present within the PRA’s ‘Dear CEO’ letter. Kelly Coombes discussed the four major pillars that companies have to adhere to, stressing the importance of paying close attention in particular to the guidance of proportionality and materiality.

In practice, climate-related financial risks have changed the face of current governance, and risk and capital management processes. Companies must consider aligning the guidelines with their decision-making to navigate past new costly challenges within the industry, utilising modern capabilities, data assessments and climate-change experts to deliver practical decisions within the given time frame. In relation to the challenges faced by organisations, due consideration must be given to a range of risks (for example, both physical and transformational) on the understanding that each particular company will be uniquely affected by climate-change.

In linking the challenges of adapting to climate-change guidelines and regulations, and meeting client expectations, our speakers considered a range of roadblocks including the interpretation of data and identifying the most proportionate measures to take. One of the main concerns raised by the audience related to convincing their organisations to consider the impact of climate change on their strategies. Our experts have identified several ways to do this, and highlight that making such a transition can help your organisation stand out from the crowd.

“One of the big insurers in the UK recently credited their ESG capability, winning a multi-million pension scheme in Japan. Growing in these capabilities is a differentiator.”

Roelof Coertze, Passionate climate change actuary

Although it can be difficult to know where to start, our Think Tank of climate-change related risk experts is perhaps an ideal place to begin. It is of the utmost importance that organisations set goals and decide from the get-go whether they want to be a leader or a follower in this green journey. However, it is worth emphasising that this process is a journey. As José Morago noted, the first step for many companies will be qualitative, rather than quantitative, efforts – prioritising discussions about how to go forward with the right transition.

Of course, it’s not all challenges and uphill battles – there are significant benefits tied to such transitions. Going back to potential and current clients, if organisations fail to get to grips with the guidance and regulatory requirements, they could end up driving away clients and investors, ultimately losing out on capital and future growth. Erica Mackay further identified marketing opportunities, which many companies are already capitalising on, in relation to making consumers aware of the transition you are making. Notably, consumer behaviour has undergone a significant shift in terms of climate awareness, so it is essential that companies cater to their concerns.

“The benefit to the company is multi-fold… if you are a part of the conversation, then you will be identifying those [right] opportunities.”

Dr. Roger Iles, Climate Risk Consultant

If companies should take one point from this webinar, it must be this: change is now. Governments and international bodies are actively talking about and acting upon climate change now. Consumer decision-making is increasingly becoming aligned with green thinking. The companies that take advantage of the zeitgeist now, will be the companies that lead the way going forward.If you would like to know more about climate-related risks and the right strategy going forward, please contact David Clamp, Founder of The Camelot Network.