What will it be: ESG or SOS?

If your mother faced severe health problems, would you hesitate to take immediate action and seek urgent treatment? Probably not. So as Mother Nature displays severe health warning signs, humanity must not hesitate to act either.

We've recently convened a panel of experts in Paris to discuss the health of our planet, sustainable development and climate action—a debate that deeply resonates in a country where bad weather thus far in 2022 has resulted in 1.4 million claims, excluding subsidence, for estimated insured losses of more than EUR 5 billion, according to the French association of insurers. Unfortunately, climate impact is not a French isolated case. Across Europe and in other parts of the world, 2022 has been plagued with historic droughts and wildfires on the one hand and floods on the other. In the US, the devastation left behind by Hurricane Ian leaves no doubt its destructive power will be remembered in years to come.

In Paris, we were privileged to hear from three experts on the subject matter—Swiss Re's Group CEO Christian Mumenthaler; Bertrand Badré, founder and managing partner of Blue as an Orange Sustainable Capital and formerly World Bank managing director; and Jean-Marc Jancovici, cofounder of Carbone 4 and president of The Shift Project—in a debate moderated by Emmanuel Cugny, president of the French association of financial and economic journalists.

The conversation was wide-ranging. Is sustainability an economic problem or an ethical one? Have we underestimated the decarbonization challenge? How much progress have we made towards achieving the UN's Sustainable Development Goals?

Three passionate experts, with three diverging perspectives, made for a lively exchange.

Sustainability is core to our business at Swiss Re. Climate change impacts us by affecting our insurance clients and their customers. Geopolitical tensions influence our investments and the proper functioning of our supply chains. Issues involving energy, poverty, biodiversity, inequality, health—basically all 17 UN Sustainable Development Goals (SDGs)—have major implications for a company that depends on risk diversification as much as Swiss Re does.

At Swiss Re, we look at sustainability from several perspectives, as risk managers, insurers and as investors with a strong focus on the environment.  We first raised awareness of climate risk in 1979. At that time, the study made headlines for its scientific value, but the topic lacked currency as a material business issue. (Why worry about something that is not causing harm, at least not on a large scale or affecting economies?)

Forty years on, perception has changed. We see far more engagement among the private sector, investors, regulatory bodies, increasingly eco-conscious consumers, and activists working to hold corporations accountable and demand action. The concept of net zero emissions has gained traction. But despite these wins, the climate situation is much worse today than it was in 1979. There is yet again a gap between the seriousness of the situation and how seriously we are taking it. On this point, our three experts agreed: We're behind schedule. So why aren’t we more worried?

According to Swiss Re Institute estimates, rising temperatures could cut global GDP by 14%, or USD 23 trillion, by 2050.

Why, then—when confronted with mounting evidence of a looming ecological and economic disaster of our own making—have we been so slow to embrace the SDGs?

For one, geopolitical tensions, wars, inflation, central bank policy changes and the lingering risk of pandemic are distractions that have cost us years of progress vis-à-vis climate action.

Another factor is that “sustainability” is a simple word that belies a very complex and vast concept. It can mean different things depending on where you live, what industry you work in, and what your cultural values are.

Clearly, “sustainable development” is too big to tackle as an individual, as a company, as an industry or as a single government. Getting to net zero in 2050 will require significant global investment, financial and otherwise. So how do we start untangling this mess so we can make progress?

Concretely, by collaborating. While the 2015 Paris Agreement has been criticized for its complexity and conflicting interests, the fact that so many countries agreed on something is in itself a major achievement. The 17 UN SDGs are fundamental benchmarks, KPIs to measure, hence manage progress. Are they perfect? No. Do they help make progress? Yes.

Collaborative bodies such as the WEF Alliance of CEO climate leaders, of which Christian Mumenthaler is co-chair, and the Net Zero Insurance Alliance (NZIA), co-founded by Swiss Re, are working to establish a common understanding of the problem to allow progress on an issue that affects us all. Specifically, in the re/insurance industry, the NZIA is developing an underwriting framework to calculate carbon emissions associated with insurance portfolios—a tool that will be essential in steering our underwriting business towards less–carbon intensive activities without necessarily applying exclusions.

As Badré said during the panel discussion, we must acknowledge that there is no "invisible hand,” and that the mechanisms of the world will not adjust by themselves, because we're not talking about a gradual transition. Rather, this is a transformation that will force us to find new ways of producing, consuming, working and investing.

As Jancovici put it, "We need to change, so nothing changes" ("Il faut qu'on change, pour que rien ne change"), meaning, to avoid doomsday we need to change our mindsets.

If the global effort to battle Covid-19 is any indication, despite many ups and downs, humanity has a proven track record when it comes to collaborating to vanquish a common enemy. To defeat the pandemic, we pooled our money, exchanged medical and scientific knowledge, and shared vaccine doses with countries in need—a simple acknowledgement that we all live on the same planet and "we're in this together". It's not easy, but clearly if we were able to tame Covid-19, we can do the same when it comes to addressing climate risk in a sustainable way.

Christian Mumenthaler once said that "The future is our collective choice.” He concluded the Paris debate still positive that "achieving our goals is difficult, but not impossible. We need to extract carbon from the atmosphere with technologies that have yet to be created. But despite the many hurdles we face, of one thing I'm sure: 'Il ne faut pas caler, il faut y aller' (‘We must not stall, we must continue to move forward’)”.

Swiss Re is by your side on this journey of transformation. In 2022, climate has yet again unleashed its destructive power upon us. In this human and economic disaster, we all lose. But the solution is in our hands. Let's collaborate to help heal Mother Nature and protect the Blue Planet where we all live, in a sustainable manner.