Availability of data is the single greatest challenge that the UK's financial sector expects to face over the next five years when addressing climate risk, a survey by Willis Towers Watson (WTW) has found.
The poll of 122 leading financial organisations, including insurers, asset managers and banks, found that 80% are most concerned about a lack of data when helping to transition to a net-zero economy.
Difficulty in making quantitative assessments, and insufficient expertise in the actions required, are also major challenges expected over the next five years, cited by 75% and 62%, respectively.
Moreover, the survey found that few financial organisations expect the level of climate risk facing their business to diminish, with 40% predicting that it will escalate over time.
This comes amid continuous warnings that the world is in a race against time limit global warming to 1.5°C above pre-industrial levels, with 43% of the survey respondents saying that implementing a net-zero strategy is the most common challenge to delivering this goal.
“Future climate risks are unprecedented and systemic, and the magnitude of the challenge is so huge, and the moment so late, that every lever is being explored to turn economies to meet the Paris targets,” said Rowan Douglas, head of WTW’s Climate and Resilience Hub.
“While the financial sector is well placed to take a lead, climate-related risk not only needs to be integrated into day-to-day risk management, but also to steer the whole economic transition to a low-carbon and resilient future.”
In addition to future climate-related challenges facing the financial sector over the next five years, the survey looked at issues senior decision-makers are having to deal with right now.
Transition, reputational, and social responsibility risks are what their organisations are prioritising today in order to achieve net-zero emissions, cited by 75%, 63%, and 57% of respondents, respectively.
“We are seeing an evolution in what net-zero finance means for the financial sector, and its stewardship role in a whole economy transition towards a climate-resilient future,” Douglas continued.
“Meanwhile pressure from ambitious new climate targets and scrutiny from central banks, regulators, investors and the wider public continues to increase. To continue to thrive, financial institutions will need to adapt and align their portfolios with a net-zero carbon world.”
Image credit: iStock
Author: Chris Seekings