The United States is hurtling toward a half-trillion dollars’ worth of annual economic losses in a do-nothing scenario on emissions.
Mindy Lubber, the CEO of Ceres, a nonprofit known for galvanizing the investment community around climate change risk, chuckled to remember how puzzled many attendees were at her organization’s first summit on the subject in 2003 at the United Nations.
A 2020 NAIC report found that only a third of 1,200 insurance companies said they had altered their investment strategy to account for the impact of climate change on their investment portfolios.
“We had people from Goldman Sachs, JPMorgan Chase, Bank of America, Morgan Stanley and other executives in the financial sector,” Lubber said over the phone. “They were all wondering why we were inviting them to a climate change summit. They were saying, ‘We thought this was an environmental issue.’”
She said many of them attended in part because massive pension funds such as California’s CalPERS, the nation’s largest public retirement and health benefits system, said it was urgent to do so given that so many of their members were already seeing the effects of climate change. “When the largest fiduciaries and institutional investors began to speak, that helped,” she said.
Still, the United States continued to lag behind Europe in its widespread recognition of the risks climate change poses for property damage from storms and sea level rise, crop losses and, eventually, the stranded assets of fossil fuel facilities as the world shifts to renewable energy. Reinsurance firms like Swiss RE and Munich RE were sounding the alarm two decades ago. J. Eric Smith, then the president of Swiss RE Americas, once told Time magazine, “What keeps us up at night is climate change. We see the long-term effect of climate change on society, and it really frightens us.”
US insurers ignore risks
Many firms in the United States continued to ignore the issue. A joint 2005 report by Swiss RE, the United Nations, and Harvard Medical School’s Center for Health and the Global Environment said, “As of today, fewer than one in a hundred insurance companies, and few of their trade associations and regulators, have adequately analyzed the prospective business implications of climate change, heightening the likelihood of adverse outcomes. This is especially so for US insurers, whose European counterparts have studied the issue for three decades.”