Dealing with a changing climate
Taking climate challenge as a given, the next pressing question
is whether or not business in general and the insurance industry in
particular is up to the challenge. That's a tough question which
Jonathon Hanks, of Incite Sustainability, wasn't afraid to confront
at the Ecocentric Journey conference, hosted by Santam in Cape Town
and presented in association with the University of Cape Town's
Criminology Centre and research-based consulting firm, Partners for
Given, however, that business success is based on past behaviour,
Hanks made the point that it is exponentially more difficult to
change the habits and actions that got you to the top. 'The bottom
line is that business response is inadequate.' Given that it takes
time to change the direction of something as all-encompassing as
industry in general, time is needed - but time is the one commodity
which is in very short supply where climate change is concerned.
'Business leaders need to be part of the solution; while we are
seeing action, the pace and scale is inadequate,' Hanks said.
The insurance industry, he noted, has a perhaps unenviable role in
dealing with climate change. It is, after all, in the front line of
requiring a changed business model as the nature of the risks faced
by insured parties change dramatically with the morphing climate.
Ernst & Young, for example, rates climate change as the top
risk faced by insurers in its Business Risk Radar 2008.
It is a challenge, however, to which insurers are stepping up.
Evidence of changing attitudes can be found in a statement from
Santam itself; it 'recognises that climate change is one of the
biggest challenges ever faced by the insurance industry, if not the
Shedding more light on the challenges, Ed Gluckman, MD of Global
Carbon Exchange, explained elements of the acute risk faced by
insurers: 'If we look at extreme weather events, from 1990-96 there
were 72 of them. From 1980-1990, there were 44; the decade before
that, 29. There is a steady escalation which brings with it an
increase in cost to society and government. Even right here in the
Western Cape, nearly a billion Rand was spent in November 2008 in
recovery from weather events, compared to just a couple of million
Despite that, and a growing change in the zeitgeist, he said the
major response from individuals and business is a 'wait and see'
For those that move early, Gluckman believes, opportunity awaits.
'In particular, there is opportunity coupled with the risk faced by
the insurance industry. By squaring up to a responsibility to the
public and leading through innovation in products and services,
some insurance companies are adapting to the changing
circumstances,' he said.
Adaptation is where the answer lies; but it has to happen
While solutions to the emerging challenges of climate change
exist, he advocates a comprehensive approach, which is based on
awareness and availability of information. 'More information
carefully processed means less risk,' he asserted.
As the insurance industry looks at adaptation, Gluckman says best
practice is emerging. Examples include a focus on the reduction of
greenhouse gas emissions, reduced insurance premiums for
lower-emission vehicles, loss prevention strategies such as
incentivising clients (through, e.g. flood resilient homes). While
these examples are international, he noted that in South Africa,
Santam was the first insurer to join ClimateWise, measuring its own
carbon footprint and is implementing strategies for management and