Climate change could eclipse Covid-19. As with the pandemic, no one is immune, but this time there is no saving vaccine. We are not dealing with a temporary risk here. What it needs now: preparations and coordinated action.
If no climate protection measures are taken, there could be global losses of more than 18% of the current gross domestic product by the middle of the century. This is according to the Swiss Re Institute’s “The Economics of Climate Change” study on the economic impacts of climate change.
Asian countries will feel climate change most acutely. China’s economy could shrink by a quarter in the worst climate scenario, and the economies of the USA and the Eurozone by around 10 % each. The Swiss Re Institute study also shows that Asia, Latin America, the Middle East and Africa have the least capacity to adapt to the changes. Austrian and German companies that have important sales markets as well as investment and production locations in the aforementioned regions should keep an eye on the following four climate risk areas: physical risks, transition risks, supply chain risks and liability risks.
1. Physical location risks
The results of the study are clear: no country will be spared from climate change. The physical consequences are already becoming visible, in the form of frequent and extreme severe weather events and natural disasters.
Due to increasing urbanisation and building in high-risk areas, such as flood plains, there are more and more properties located in hazardous areas. This increasing risk inevitably means that companies have to work ever more closely with their insurance companies. However, some risks can be countered by more robust infrastructure. When building new sites, natural hazard risks such as mudslides and landslides should be clarified.
Better data collection and use will help companies understand the full extent of their exposure. Swiss Re’s CatNet tool is a good example of this. It allows companies to analyse the impact of climate change in different regions of the world.
2. Transition risks to a low-carbon future
To avoid the most serious impacts of climate change, all stakeholders should pull together to reduce greenhouse gas emissions. With the increasing introduction of regulations and measures, this will be an issue that every company will have to deal with to a greater or lesser extent in the future.
CO2 taxes and other sector-specific taxes will impact some industries more than others. Similarly, switching to less CO2-intensive production pathways and climate-resilient technologies and products will be easier for some than others. These changes will take time, but to avoid additional business costs, action is needed now.
Another very present topic is electricity generation. According to the Federal Ministry for the Environment, Climate Protection, Energy, Mobility, Innovation and Technology, 100 % of total electricity consumption in Austria is to be covered by renewable energy sources by 2030.
3. Supply chain risks
In 2020, the far-reaching consequences of large-scale supply chain disruptions have already become apparent. Companies must continue to be prepared for the increased number of disruptions and take this increased risk into account.
Agile companies are looking ahead with strategies to respond to supply chain disruptions and supplier changes. This requires merging internal data with data from various external sources to have a clearer and always up-to-date overview. This also means that transparency in supply chains is becoming increasingly important, especially when quick responses are required.
4. Liability risks
The attitude of companies and their actions in relation to ESG challenges are increasingly seen as a liability risk. Strict controls by the public and investors are pushing companies to focus more on their social and environmental performance than before.
In addition, underwriters will also pay more and more attention to ESG risks. Companies should therefore use data collection technologies even more intensively. This transparency also helps risk carriers to develop adequate insurance cover. The stricter due diligence checks will also lead to an increase in liability risk.
Risk minimisation through data use
Implementing appropriate data collection and analysis measures are among the most important concrete steps companies can take now to better prepare for the impacts of climate change. This data can help companies minimise risks and fully prepare for the impact of physical, transition, supply chain and liability risks across business sectors.
We are all already feeling the effects of climate change. The recent floods in Austria and Germany or the tornado in the Czech Republic show us mercilessly how strongly we depend on an intact environment. Companies should set the right course today in order to remain safe and successful in the future.
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Tanja Dippel is Customer & Distribution Manager for Austria and Central & Eastern Europe at Swiss Re Corporate Solutions and has over 20 years of experience in the insurance industry. Before joining the company in 2017, she worked on the broker side at GrECo and Marsh.
CEO Swiss Re Corporate Solutions
Andreas Berger is CEO of the industrial insurer Swiss Re Corporate Solutions and a member of the Executive Board of Swiss Re. With over 25 years of insurance experience, he joined the Swiss reinsurer in 2019 from the Board of Management of the Allianz Group’s industrial insurer.
Swiss Re Corporate Solutions
Swiss Re Corporate Solutions provides risk transfer solutions for large and medium-sized industrial clients worldwide. Innovative and individually tailored products and standard insurance coverages help make companies more resilient. The industry-leading claims service provides companies with additional financial security. Swiss Re Corporate Solutions serves clients around the world and can count on the financial strength of the Swiss Re Group. For more information about Swiss Re Corporate Solutions, please visit
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