Lack of data regarded as biggest challenge for UK financial industry in addressing climate risk
The necessity for clear plans on how to reach net-zero targets and creating a level of resilience are some of the biggest challenges for financial businesses addressing climate risk.
According to a survey by Willis Towers Watson of leading financial businesses, the availability of data represents one of the biggest challenges businesses expect to experience over the next five years to tackle climate risk.
The survey suggested that 80% of respondents reported data as their biggest concern in regards to an effective transition to a Net Zero economy. Delivered as part of the Willis Towers Watson’s Climate Risk and Financial Stewardship Summit, the survey included banks, insurers, wealth and asset managers to gather insights on the progress made to manage the impact of climate risk on their business.
The study also showed that few businesses expect the level of risk related to climate change to decline, with most anticipating the existing level of risk facing businesses to escalate in the coming years. With current trends indicating that we are struggling to maintain temperature levels from exceeding the 1.5-degree target of pre-industrial levels, respondents stated that creating an effective net-zero strategy was the biggest challenge, followed by a lack of data and resources.
Aside from the climate-focused challenges facing the financial sector, respondents highlighted that transition, reputation and social responsibility were key measures that organisations were prioritising to reduce the gap and achieve net-zero targets.
Rowan Douglas, Head of Willis Towers Watson’s Climate and Resilience Hub stated that climate risks for the future are unprecedented. While the financial industry is in a strong position to take a leading role, climate-focused risk needs to be integrated into daily management but also influence the entire economic transition towards a low-carbon and resilient future.
Reports from the Carbon Disclosure Project (CDP) indicate that approximately half of the world’s 500 biggest businesses are yet to conduct any analysis of how their portfolio is impacting the climate. This is even though the portfolio emissions of global financial organisations are over 700 times bigger than direct emissions.
We are experiencing a transformation in what Net Zero finance means for the financial industry and its importance in an economic transition towards a climate-resilient future. The added pressure from bold new climate targets and further inspections from banks, regulators, investors and the wider public are continuing to rise. To succeed, financial institutions need to adapt, acquire data to support their new plans, and ensure their portfolios are aligned with a net-zero carbon world.