Monthly Archives: September 2010

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The Risks of Climate Change: Christiana Figueres Wants Improved Resiliency and Insurance Solutions

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Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, speaks at Climate Week NYC 2010. (Photo: Swiss Re)

Yesterday, I looked at the difference between mitigation of climate change and adaptation to it — a topic broached during Climate Week NYC 2010 on Monday during Swiss Re’s “Risk & Resiliency” panel.

Fortunately, it was such an insightful event that we still have more to talk about.

Walter Bell, chairman of Swiss Re American Holding Corp, kicked off the discussion, mentioning that his company has had a deep interest in climate change ever since Swiss Re identified it as an emerging risk two decades ago in the mid-80s. “Swiss Re’s approach is to first understand a risk then try to determine how to manage it,” he said. “We want to look not just at the risk, but at the solutions.”

Along these lines, he — and just about everyone else in attendance — touted the Caribbean Catastrophe Risk Insurance Facility (CCRIF) as a prime example of a way to not just help illuminate the problems — but help solve them.

“The CCRIF is a cutting-edge risk management solution,” he said. “The CRIF is not just a model or a concept. It works. Those member countries have received checks after a disaster.”

For the uninitiated, CCRIF is a risk pooling mechanism that is owned and operated by sixteen member countries in the Caribbean. And the best part is that the fund has a “parametric trigger” that helps nations struck by a disaster get relief money immediately. What this means is that there is no lengthy, complicated claims process after an event. If an earthquake of a certain magnitude strikes or if a hurricane with winds of a certain speed makes landfall, the payouts begin instantly. (More info here.)

The panel’s headliner, Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, built on this momentum, highlighting the disasters we have seen this year, both in the Caribbean and elsewhere across the globe, that may be a precursor to the erratic weather we will see in a future affected by climate change. “This year, as you know, has seen no shortage of extreme weather events,” said Figueres. “The bottom line is that these events illustrate what could happen in the future.”

To help combat climate change and lessen the blow, she believes the world needs to — quickly — do three things simultaneously: (1) reduce emissions, (2) adapt to the already-inevitable effects so as to minimize the loss of life and livelihoods, and (3) increase resiliency to better deal with the effects of the future.

For developing nations, she categorized progress in these areas as “critical” to not just meeting the Millennium Development Goals outlined by the UN for all of the world’s 192 countries, but to preventing an acceleration of the endemic poverty that exists in so many areas. Without progress, standards of living in some countries might become even worse than they are today.

She listed three major areas in which resiliency must be prioritized: health, agriculture and water. For health, the first step needs to be creating solutions to better deal with climate-sensitive diseases. Figueres noted the increase in tropical diseases throughout the world. Even in the United States, she revealed, “dengue fever-transmitting insects can now be found in 28 US states.” Troubling indeed.

In terms of agriculture, she said that there have been improvements. In Ethiopia, more farmers are switching to more drought-resistant crops with good results. Dupont, too, she said has made strides in developing drought-resistant solutions for rural crop-growers.

The biggest issue, however, is the one that affects both of those issues — and everything else: water. “Climate change will affect all aspects of the water supply,” said Figueres. And it’s not only adapting to the future that is a challenge. Even today, she says, things are below par. “To make matters worse, water is already being badly managed in many locations.”

In order to better manage the future risks of climate change, Figueres stressed that the private sector needs to become more involved. And not just because corporations should be better global citizens — but because they need to protect themselves. “No sector will be immune to climate change … Sooner or later, all businesses will need to climate-proof themselves.” she said. This, she stresses, means protecting everything from supply chain to point of sale to place of investment to water supplies.

But with great downside comes great upside. “Business needs to adapt itself,” she said. “And adaptation holds investment opportunities.” ”

“Money spent on adaptation today will be money well spent for our future,” said Figueres. “Aggressive adaptation today needs to become the societal … insurance program of the 21st century.Money spent on adaptation today will be money well spent for our future,” said Figueres. “Aggressive adaptation today needs to become the societal … insurance program of the 21st century.”

Some of these investment opportunities include new agricultural products, improved water management and green construction. And, of course, we have all heard about the new “green economy” of renewable energy development that President Obama has continued to assure is just over the horizon, ready to lift the country from dreadful unemployment numbers and put America back at the front of global manufacturing and innovation.

The other opportunity lies in insurance. “Even when all adaptation measures have been taken, the risks … will not be ruled out,” said Figueres. “The insurance industry is already developing insurance products and must proceed quickly.”

Swiss Re will be one of the companies trying to make sure that happens, but there are plenty of others. Just look at all the insurance company initiatives underway. Too few of these are about actually creating policies, but much of the heavy lifting and relationship building has already been done, so some innovative products should not be far off. (We’ll talk more about the progress on that in a later post … stay tuned.)

Figueres thinks all innovation will pay off ultimately. “Money spent on adaptation today will be money well spent for our future,” said Figueres. “Aggressive adaptation today needs to become the societal … insurance program of the 21st century.”

And the time to start is now, she says, even if getting everyone on the same page is still a challenge. “The momentum needs to be lead by science,” she said. “It needs to be lead by business. It needs to be led by civil society. How do we get them all moving in concert?”

That, as everyone participating in Climate Week NYC 2010 already knows, is the $64,000 question.

We welcome your suggestions below.

Who Will Replace Larry Summers on Obama’s Economic Team?

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As you may have heard, chief White House economic advisor Lawrence Summers has announced that he will be resigning at the end of 2010.

It is presumably accidental that the papers on the last day of summer report that Larry Summers is leaving the administration. There is an exodus of economic officials from the Obama team, and they are mostly going out with hostile commentary. The economy is not booming, and the president’s poll numbers are poor.

That must be the economic team’s fault.

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One commentary I read this morning says President Obama will be the Democratic Herbert Hoover.

Now that Summers is the third major member of the team to bolt (following Budget Director Peter Orszag and adviser Christina Romer and leaving Treasury Secretary Timothy Geithner as the only top-level economic adviser remaining from Obama’s original cast), everyone is asking the same question: Who will Obama anoint as Summers’ successor? (The secondary question is “how did he do?

” Here’s one guy’s answer.)

This morning, I was watching long-time White House reporter Chuck Todd’s rather new and rather good show The Daily Rundown and there was talk about the business community’s displeasure with President Obama’s policies. Meet the Press host David Gregory appeared in a segment and shared an anecdote from a recent gathering of CEOs that he attended during which one of the high-power execs told him “the White House has lost everybody in the room.” Gregory followed that up by noting that Obama needs to find a way to turn that around when he is “relying upon the private sector to turn things around.”

So … who is the best man for the job?

According to this list of candidates to become the next director of the White House National Economic Council, it very well might be a woman. Here are Reuters’ top ten candidates, four of which are women and five of which are more firmly rooted in the business world than the economics community. (The article didn’t mention whether the order they are listed in held any significance.)

  • Laura Tyson, a member of the President’s Economic Recovery Advisory Board and professor at the University of California, Berkeley
  • Diana Farrell, a deputy to Larry Summers on the National Economic Council
  • Jason Furman, a deputy to Larry Summers on the National Economic Council
  • Ann Fudge, former senior executive at General Mills and Kraft
  • Gary Gensler, Chairman of the Commodities Futures Trading Commission
  • Gene Sperling, Counselor to Treasury Secretary Time Geithner  and former Director of the National Economic Council (1996-2000)
  • Mark Zandi, chief economist at Moody’s Analytics
  • Jeffrey Immelt, Chairman and CEO of General Electric
  • Richard Parsons, Chairman of Citigroup
  • Anne Mulcahy, former Xerox chief executive

Who do you think should take over?

The Risks of Climate Change: Overcoming the Resistance to Discussing Adaptation

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The first event after the official launch of Climate Week NYC 2010 focused on adaptation. Sponsored jointly be Swiss Re and The Climate Group, “Risk & Resiliency: Risk Transfer & Adaptation in Developing Economies” discussed the once-taboo notion of preparing now to deal with the inevitable effects that climate change will have in the future — an outcome that will occur even if society was able to completely stop putting carbon dioxide into the atmosphere tomorrow.

Here is how the event’s hosts framed it:

Reducing carbon emissions is essential, but alone it is insufficient to meet the challenges of climate change.The current and potential impacts of severe weather will force society to increase its resilience through both physical and financial means.
Developing countries face the greatest challenges with the least means at their disposal. Helping them to adapt involves far more than purely doing the right thing and will require a strategy driven by both business and political actions.

Reducing carbon emissions is essential, but alone it is insufficient to meet the challenges of climate change. The current and potential impacts of severe weather will force society to increase its resilience through both physical and financial means.

There was a lot of interesting thoughts and perspectives to come out of the panel — and I will get to some of those in a later post. But first, I want to address the notion that some people are still resistant to looking past mitigation (i.e., reducing CO2 emissions) and promote/fund adaptation efforts.

The reason the momentum towards adaptation initiatives (something the UN discusses often and Time magazine explained well in layman’s terms — way back in 2007) was formerly frowned upon by most environmentalists — and still is by some — is because it is paramount to acknowledging that, at least on some level, the fight is already lost. Many have wanted politicians, businesses, nonprofits, scientists, engineers and everyone else who could help to focus solely on preventing climate change — not living with it.

“Talking about adaptation was almost an admission of defeat,” said Mark Kenber, deputy CEO of The Climate Group, a UK nonprofit that focuses on combating climate change.

Even Kenber himself admitted that he was once resistant to embracing adaptation. He now fully realizes that both sides of the equation are equally vital, however. And while the issue is less polarizing than it was in the past, some remain entrenched on the mitigation side.

Most have “seen the light” on embracing adaptation as well, but, practically, this historic divide has created a world where numerous governments have different sections that deal with mitigation/emissions reduction and adaptation. “That separation has become institutionalized,” said Kenber. And that still complicates things.

Many projects financed for their ability to combat climate change, for instance, get looked at through different lenses by different groups with different motivations. Kenber has seen certain projects in the developing world in which one group looked at them as aiding adaptation, another saw them as mitigation efforts and still a third wanted to claim them as assisting development goals.

But given how much climate change concerns effect development in much of the emerging world, this “debate” is like looking at a project and seeing it as six of one, a half-dozen of the other. Ultimately, all parties have the same goal — even if they don’t know it. As Kenber pointed out , the cruel reality of this fractured outlook on mitigation and adaptation is that “the worse we do on the former, the more we need to succeed on the latter,” he says.

If this was just about semantics, it wouldn’t be significant.

But it is more than that. It is about money — lots of money.

The experts on the panel suggested that $400 billion is needed throughout the world for adaptation initiatives. During climate talks in Copenhagen in 2009, developed countries agreed to pool together some $30 billion to deal with climate change. Actual commitments beyond those that dovetailed with previous pledges have lagged, however.

This piece from Reuters breaks down the accounting.

Kenber said that, so far, $3.2 billion has actually been ponied up. That number is not the total that has been pledged with a “check’s in the mail” wink, but the actual committed funds. And of this, he says that barely $600 million is earmarked for adaptation efforts.

I’m not a mathematician, but $600 million seems a lot less than $400 billion.

So while it is nice that, rhetorically, many people now believe adaptation belongs alongside mitigation when talking about combating climate change, talk does little to build the dams and floodwalls that will be vital to the survival of the people in places like Pakistan and Bangladesh in the coming decades nor does it help provide the drought-resistant crops that will increasingly be needed if local agriculture is to continue being a viable means to feed people in places like Ethiopia and Malawai.

Mark Kenber Climate Group

Mark Kenber of The Climate Group discussing adaptation to climate change during Climate Week NYC 2010. (Photo: Swiss Re)