Climate Change Poses Much Greater Existential Risk for the World Than COVID-19

Similar to the COVID-19 pandemic, climate change ultimately will be managed by “bending the curve” of temperature rises and greenhouse gas emissions, according to Rowan Douglas, Head of Climate and Resilience Hub at Willis Towers Watson.

But that’s where the similarities end. Douglas warns that the coronavirus pandemic will be a “drop in the ocean,” compared to the global disruption possible with climate change in the decades ahead.

Unless radical policy changes are adopted to control emissions, “the relative blip that we’ve experienced in 2020 [with the COVID-19 crisis] will be considered almost like a little dot in history,” he said in an interview for Carrier Management’s ExecTalk series.

(The full interview is available via this audio podcast, but four video clips from the ExecTalk recording are also included in this article. Editor’s note: The interview was conducted before the COVID-19 pandemic had claimed more than a million lives, which it now has, and before the U.S. election in November.)

Climate Emergency

And what would this climate emergency look like? Douglas cited increasing temperatures of three, four degrees centigrade, or possibly even more, which likely will lead to rising sea levels, droughts, water shortages, massive agricultural risks (such as crop failures), and challenges with excess heat in many countries with large populations, “and no real ability to cool the populations down.”

“It’s easy for us to forget how utterly dependent we are on these natural systems,” he cautioned.

The next 10 years, which Douglas calls “the climate decade,” are crucial. During these years, a fundamental shift in consciousness, and activity to mitigate climate change, must occur, he emphasized.

Without such a shift, he warned, “I think we are heading into very, very, very dangerous territory.”

Reasons to Be Optimistic

Despite some of his rather gloomy prognostications about climate change and the trajectory of rising global temperatures, Douglas is actually quite optimistic in his future outlook – because governments, regulators, corporations, and, yes, individuals, are increasingly aware of the grave threats that could be ahead, if nothing is done to mitigate climate change and build climate resilience.

For example, he said, the COVID-19 pandemic has reminded organizations outside the insurance industry about the importance of high-impact, low frequency events. The pandemic has “amplified the theme of resilience, massively, as a mainstream economic financial business issue….”

“We used to have to … convince people that these sorts of risks were material, and important, but we don’t have those sorts of issues anymore. People realize that while it was a pandemic this year, it could be a set of other big risks in the future,” he noted.

“Climate and related natural disaster risks will surf on that wave of a greater concern about resilience. So when the COVID crisis subsides – hopefully as soon as possible into 2021 – climate will still be there [on corporate agendas].”

Further, he noted, the UN Sustainable Development Goals and the Paris Climate Agreement (which marked its fifth anniversary in December 2020), are “beginning to drive government policies around the world….”

Building Resilience

When examining these climate goals, “you realize how important insurance, and its related capabilities, will be to achieving these goals through managing risk, setting the right framework for behavior, and operations, and obviously managing finance.”

Indeed, Douglas is confident the insurance industry will be in the vanguard of helping societies build resilience against climate change.

He pointed to some historical examples – when the insurance industry helped to build resilience to urban fire, which was a climate change-type issue of the 19th century, in the U.S., in Europe, and around the world.

Thousands of people died in the 1870s and 1880s in massive urban fires in cities such as Chicago, and Peshtigo, Wis.

“People said, ‘We can’t go on like this,’ and it was the insurance sector that did the analysis,” which led to changes in building codes and zoning laws, he noted.

While these changes added to the costs, they actually lowered the risk, while also lowering the cost of capital, and thereby, making properties insurable, said Douglas.

As a result of these efforts by the insurance industry to control urban fires, probably millions of lives and billions of dollars have been saved “by the efficient economic trade off that insurance can bring to manage risk and return,” he explained.

“I think our industry’s forgotten this; it’s that skill that’s going to be at the heart of navigating the least-worst pathway to a sustainable and resilient future.”

The question that must be addressed in the battle against climate change is “how much do we spend on physical resilience, against how much do we spend in reducing emissions, and what’s the trade off?” he questioned.

“I just think that we’re going to be going through some pretty rocky times in the coming years, and the industry has got an enormous role, and opportunity to play, to help manage that as best as possible,” he said.

And, last but not least, another source of optimism for Douglas is the “massive” shift in attitudes he has seen on the part of individuals. After almost 15 years in the climate and insurance sector, he rarely runs into climate change deniers or people who say climate change isn’t caused by human activities.

“I find that there’s obviously skepticism, and healthy skepticism, about how, and what we can do to confront this massive [climate] challenge,” he said. “But once people get over that, and they do realize there are some positive pathways, suddenly some people get the bug, they roll their sleeves up, and they realize that there’s a role for them,”

There is just about enough time, during the coming “climate decade” to change the trajectory of rising temperatures and greenhouse gas emissions, Douglas emphasized. “So let’s, as an industry, seize the opportunity – this really is an opportunity to play a key role and do good but also do good business.”

Given his many years in the climate and insurance sector, Douglas knows whereof he speaks. As head of Willis Towers Watson’s Climate and Resilience Hub unit, Douglas and his team specialize in the management, regulation and financing of risks from climate, pandemic and other perils. He was a founder of the Insurance Development Forum along with the World Bank, the UN, and global insurance industry leaders in 2016. This group aims to use the insurance industry’s risk expertise to address the challenges and opportunities presented by the UN’s Sustainable Development Goals and the Paris Climate Agreement.

This article about the ExecTalk interview, along with the videos and podcast, were first published in Insurance Journal’s sister publication, Carrier Management.