The FINANCIAL -- Swiss Re announces it will adopt the climate-related financial disclosure recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
As a member of the TCFD, Swiss Re helped develop these voluntary guidelines on climate-risk reporting. Swiss Re believes the guidelines will ensure more transparency on climate-related risks and help users and providers of climate-related financial disclosures, including lenders, insurers and investors, to more effectively measure and evaluate the financial implications of climate change.
The TCFD, which was established by the Financial Stability Board (FSB) and of which Swiss Re is a member, has developed the voluntary guidelines for more consistent and comparable climate-related financial disclosures, to help providers as well as users of such disclosures make more informed decisions about the climate risks that could affect their business and investments. The TCFD has focused on disclosures related to the financial impacts of climate change on the reporting companies, according to Swiss Re.
David Cole, Swiss Re's Group Chief Financial Officer, said: "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."
For re/insurers, climate-related risks and opportunities constitute a key topic linked to the industry's core business, including weather-related risk transfer business. The scientific consensus is that a continuing rise in average global temperatures will have a significant effect on weather-related natural catastrophes and will account for an increasingly large share of natural catastrophe losses.
As part of adopting the TCFD's recommendations, Swiss Re will expand its risk analysis. This means that Swiss Re will include in its future Annual Financial Report aggregated expected losses from weather-related catastrophes, a description of physical risks from changing frequencies and intensities of weather-related perils, as well as the impact of a 2°C scenario on the business, strategy and financial planning. Swiss Re will also report on the transition risks resulting from a reduction in insurance interest due to a decline in value, changing energy costs, or implementation of carbon regulation.
In adopting these guidelines as well as by taking into account the climate-related disclosures of its clients Swiss Re will be able to more effectively measure its own transition risks, and assess potential impacts of climate-related risks and opportunities on the organisation's business, strategy and financial planning.
Secondly, as a global long-term investor, taking into account the additional climate-related disclosures of companies in which it invests will help Swiss Re make better informed investment decisions. At the same time, Swiss Re will give more information on the metrics its uses to assess climate-related risks and opportunities associated with its investments.
Aligned with Swiss Re's focus on sustainable and attractive risk-adjusted returns, Environmental, Social and Governance (ESG) criteria are already an integral part of Swiss Re's investment approach as highlighted at the Investors' Day earlier this month. Having the right metrics in place represents the starting point for continuous improvement. Therefore, Swiss Re is also switching to ESG benchmarks for its listed equity and corporate bond portfolios. Swiss Re's strong Group-wide commitment to Sustainability is also defined in the Swiss Re Sustainability Risk Framework.
Guido Fürer, Swiss Re's Group Chief Investment Officer, 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 momentum in the industry has increased with activities from task forces and regulators like the FSB and the TCFD to improve transparency about climate related risks and opportunities.
The guidelines will add to several initiatives and organisations that analyse climate change and possible solutions in which Swiss Re is an active member, including Principles for Responsible Investment, ClimateWise and UNEP FI Principles for Sustainable Insurance. In this context Swiss Re also participates in relevant projects and publishes research on the topic of climate change.
In line with the intent of the FSB disclosure requirements, Swiss Re will start to publish climate-related financial disclosures in 2017 and gradually increase scope and granularity of disclosures over time. Swiss Re will also describe the targets it uses to manage climate-related risks and opportunities and show its performance against these targets.