Climate Change Risks and Opportunities

1
Climate Change Risks and Opportunities

• Oliver Dudok van Heel

2
Climate Change the Financial SectorAn Agenda
for Action

• Andrew Torrance, CEO Allianz Cornhill
• London, December 2, 2005

3
Agenda

• 1 Facts on Climate Change
• 2 Climate Change the Financial Sector
• 3 Agenda for Allianz Action

4
Agenda

• 1 Facts on Climate Change
• 2 Climate Change the Financial Sector
• 3 Agenda for Allianz Action

5
Facts on Climate Change
The Facts

• Hurricane activity increased- Katrina costs
  60bn for insurance industry and 470m for
  Allianz Group
• Weather disasters are hitting Europe hard
• - 1999 storms, 2002 floods, 2003 heat wave
• Governments react by curbing CO2 emissions

6
Facts on Climate Change
The Facts
Global Warming Temperature Rise over Past 100
years Source IPCC
7
Agenda

• 1 Facts on Climate Change
• 2 Climate Change the Financial Sector
• 3 Agenda for Allianz Action

8
Facts on Climate Change
The Impact

• Climate change increases claims for insurers
• Climate change could have an impact on mortality
  and diseases
• Climate policy can change investment portfolio
  and share price
• Climate related risks can have an impact on all
  financial services

9
Climate Change and the Financial Sector
New Risks, New Demands

• Insurance
• - climate change related losses are rising at
  2- 4 per year
• - larger, more frequent natural catastrophes
• Banking
• - credit risk is increasing due to uncertainty
• - potentially large new climate change
  markets in emissions trading, re- newables,
  weather derivatives
• Asset Management
• - climate change is a mainstream risk and not a
  socially responsible investment (SRI) issue
• - climate policy can alter the risk profile of
  companies

10
Agenda

• 1 Facts on Climate Change
• 2 Climate Change the Financial Sector
• 3 Agenda for Allianz Action

11
Risk Mitigation and Investment Opportunity
The Agenda for Allianz Action

• Address climate change at board level and put it
  on a par with other business risks when taking
  decisions
• Screen climate change risks in our business
  through an internal task force
• Increase investment in renewable energy sector by
  500 million euros over the next years.

12
Climate Change andthe Financial Sector
New Solutions

• Awareness raising through risk consultancy
  Consulting with clients and governments
• Product Development Upgrading to environmentally
  friendly technology
• Climate Change and Poverty Can micro-insurance
  provide a safety net against natural
  catastrophes?

13
Tackling Climate Change A View from the Finance
Sector

• Karina Litvack
• FC Asset Management plc

14
Debate

• Why dont companies invest more in clean
  technologies?
• Why dont investors channel more capital to clean
  technologies?
• What does business want to do about Climate
  Change
• What does business want from government?
• How can the market be used to crack this problem?
• What has worked before?

15
Agenda

• Introduction Who is FC
• Investors and Climate Change
• Where we were and where we are
• What next?
• Market failure
• The Business of Politics
• Mobilising the markets
• Debate

16
Who is FC Asset Management

• No. 4 UK asset manager Top 15 in Europe
• 190 billion Assets Under Management (129.9
  billion as at 30.09.05)
• Global investor
• Long-term holdings Pensions Life Assurance
• Specialist in Governance Sustainability
• Growing activism of investment community
• Governance scandals
• Client and regulatory pressure to mind the
  store
• Engaged shareowners Dialogue and Advocacy

17
Investors and Climate Change

• Where we were
• Governance
• Risk Assessment
• Policies
• Strategy
• Targets
• Disclosure
• Energy efficiency
• Products
• Public Relations

• Where we are
• An impasse
• Risk/Reward ratio
• Investment Horizon
• Lack of policy clarity
• Market failure
• Political paralysis
• EU ETS

18
What next?

• Market failure
• The Business of Politics
• What has worked
• Health Safety regulation non-tradeable
• SOx and Acid Rain tradeable
• Mobilising the market
• Success of ETS in changing Utility Sector
  valuations
• Impact of oil prices on Renewables IPOs

19
What next?

• The Business of Politics
• Has Governance implications
• for Business
• for Government
• The Politics of Litigation
• When rules and markets fail
• Costly disruptive
• Global trading markets
• Corruption

20
Climate Change Risks and Opportunities

• Questions?