L&G CEO calls on insurance industry to ‘seize opportunity’ to address climate change challenge

Written by Michael Griffiths

11/11/2019

The insurance industry must seize the ‘$30trn investment opportunity’ to address climate change, according to Legal and General Group CEO, Nigel Wilson.

Speaking at the S&P Global 2019 European Insurance Conference in London, Wilson called on the industry to shift investment thinking away from climate risk, and more towards climate resilience.

The L&G CEO suggested there are several challenges facing the industry, including constrained governments, bank balance sheets, and an ageing demographic – all of which he said could have multiple implications for personal finance, healthcare, social care, housing and the labour market.

Commenting on what he described as the ‘defining challenge for the generation,’ however, Wilson described climate change as a ‘climate opportunity.’

“We are tightrope walking blindfolded,” Wilson said. “We are currently at an unprecedented state of political, economic, social and environmental development.

“Massive underinvestment has caused productivity growth to be at an all-time low. The insurance sector is a really critical source of financing, and the right response to what is going on right now is to invest in new physical and digital assets.

“The US, the EU and the UK are all chronically underinvested in terms of transport infrastructure, health, housing – and clean, green and cheap energy.

“We have a set of social and policy challenges which make the insurance sector more relevant, and more vital, in economic and social purpose terms than ever before.”

Wilson said the industry wasn’t ambitious enough, and also stressed the UK and Europe’s need for development capital – citing that of the 20 largest technology companies in the world, 11 are based in the United States, while the other nine are in China.

He highlighted EIP estimates, of Europe needing $688bn to be invested in EPU infrastructure every year, and also suggested the World Economic Forum is estimating a global infrastructure gap of $15trn by 2040.

“If our sector can’t play its part at this time, when interest rates are bobbing around either side of zero, then history will judge us really badly,” Wilson added.

“It’s a challenge to which our industry can rise up to. It’s a huge opportunity. We now accept the overwhelming evidence of the climate scientists, and the economic model that rests upon it. To put global warming on a trajectory of less than two degrees centigrade, it requires net zero carbon emissions, and a $30trn investment by 2050.

“For us as a sector, there are clear issues related to risk, principally transition risks and the need to avoid stranded assets, and we need to be aware of and anticipate policy and regulatory changes.

“We should, however, be very appreciative of the leadership being played by regulators in this particular area, in preparing the financial system for the role in which it has to play.”

Related Articles