Making the smart transition in your ESG strategy
Gallagher Specialty’s James Bosley outlines why insurance is critical to fulfilling the ambitious energy transition commitments unveiled at COP28.
After two weeks of talks in Dubai, the COP28 climate summit concluded with a historic deal calling for a “transition away” from fossil fuels exactly 24 hours after the official end of the proceedings. The conference saw a fierce battle between countries that wanted language to include the “phase out” of fossil fuels, and those against it, who wanted to prioritise other methods of reducing emissions such as carbon capture.
Whilst both topics were hotly contested, there was consensus concerning the importance of renewable energy sources and evidence in abundance that the energy transition is well underway. COP28 was awash with solar, wind, nuclear, and hydrogen solutions, ranging from large hybrid energy corporations with a global presence to technology start-ups and consulting firms.
Insurance already plays an important role in the renewables sector, providing coverage from project inception, throughout construction and in subsequent operations. This includes guaranteeing technology performance, as well as covering construction delays, subsequent operational risks, the threat of political instability and violence, and credit risk.
Nevertheless, where insurance will be essential is in facilitating the de-risking of the transition and enabling the scale, resilience, and bankability of potential solutions.
The climate transition, however, is not limited to the energy transition, but presents new risks across a company’s full value chain. The impact will be felt to some degree across most, if not all, client sectors.
Climate change has led to increasing frequency and severity of natural catastrophes, impacting either directly on a company’s physical premises, or indirectly through non-damage business interruption of their operations or supply chains.
Without adequate insurance to respond to transition needs or the increasing risks of climate change, the ambitious commitments made at COP28 will struggle to come to fruition, and companies may find themselves increasingly exposed to balance sheet risk.
Gallagher Specialty is focused on enabling our clients by identifying these transition-related risks and addressing the genuine client need for new solutions.
This includes not only enhanced insurance coverages, but the creation of specific risk transfer mechanisms for increased natural catastrophe exposures, as well as advisory services to support our clients’ ongoing resilience and adaptation journeys.
James Bosley is head of climate strategy at Gallagher Specialty.
This article was first published in Gallagher Re’s 2023 Natural Catastrophe and Climate report. To download a copy of the report, click here.