First let me say how pleased I am to be here today to meet such an important industry for many of Defra’s policy areas. From flood management to farming and forestry to biodiversity - which we’re all here to talk about today - to one of my specific ministerial responsibilities: the cross-cutting issue of climate change adaptation.
Here amongst such a learned audience, I probably don’t need to say, but the UK’s climate is changing and is likely to do so for the foreseeable future.
Irrespective of a global deal on carbon emissions going forward - and my Government puts itself at the forefront of efforts to reach such a deal - we are already locked into some climate change from emissions already in the atmosphere. For the UK, this will bring hotter, drier summers, warmer, wetter winters and more frequent, extreme weather events.
But for other parts of the world, the impacts of climate change are likely to be felt much more severely. Indeed, it will be an issue wherever you do business. The smart economy will take steps now to plan, prepare and become more climate resilient. We must adapt to our changing climate.
Taking action to adapt now is vital to the wellbeing of our society and economy. For example, the widespread summer flooding in 2007 affected 55,000 homes in England, killed 13 people and cost the economy £3.2 billion.
Climate change will expose individuals, businesses and the natural environment to new risks, and affect their exposure to existing ones. Insurance is important in this context for three main reasons:
First, the insurance industry is uniquely positioned to play a key role in efforts to increase the UK economy’s resilience by using the latest science to help protect people and businesses from climate risks.
Second, large investment portfolios that factor in climate resilience are likely to be more attractive and bring greater returns.
And thirdly, insurance enables agents to spread the losses resulting from climate hazards across time, over large geographical areas, and among different social and commercial communities.
But the story is not just one about minimising and mitigating risk. The flip side of risk is opportunity and growth. My department has as one of its priorities to “support a strong and sustainable green economy’, in essence one that provides jobs whilst minimising environmental impact. To do this we are working together with the departments for Business, Innovation and Skills, and Energy and Climate Change to develop a Roadmap to a Green Economy. This will articulate the business and investment environment the Government will provide to make possible the shift to a growing green economy.
And I can give you an example of this transition to a green economy. The UK financial services sector is taking a lead - a first mover advantage - in developing and selling new, climate-related products and investments, in much the same way we have established London as the global centre for carbon trading.
We have seen this with the nascent market in weather derivatives, worth some £45 billion last year.
As expert risk managers, the insurance industry has a key role in preparing the country for climate change - and can teach us a lot about assessing risk and dealing with uncertainty in policy making.
Uncertainty is a fact of life - as an industry you know that better than anyone - but we mustn’t let this paralyse our response to climate change. And the insurance industry leads the way in this approach in helping society to cope and business to thrive.
That’s not to say we don’t need to minimise the uncertainty on climate change - providing you with the evidence you need to manage risk and base business decisions on. Despite the financial circumstances, we are continuing to invest heavily in improving the evidence base, for example through the world-leading Met Office Hadley Centre. Indeed, I visited the facility last month and was impressed by their dedication, enthusiasm and remarkable science.
We are starting to receive climate risk assessments from those organisations we deem to be in the front line of the effort to prepare the country for climate change - for example water, transport and energy infrastructure companies and environmental regulators.
These climate risk assessments improve the evidence base and help us target our efforts to build climate resilience, as well as helping to raise the profile of adaptation action.
We are conducting the National Ecosystem Assessment - which Bob Watson will talk about in more detail in a moment.
All of these things will inform the first ever UK-wide assessment of present and future climate risks - to be published in January next year. Biodiversity is a key sector being looked at as part of the climate change risk assessment - recognising its crucial role in supporting everything we do through ecosystem services.
We shouldn’t underestimate the value of services from the natural environment, for example from natural water purification, the carbon recycling going on in our oceans, or from bees and other pollinating insects across the world. In the UK these pollination services are estimated to be worth up to £440m per year.
Once the Climate Change Risk Assessment has identified the key climate risks to the UK, we will conduct an economic analysis and set in place a programme of action to address them.
But this won’t just be a programme by Government for Government. Key industries like yours are ahead of the curve in terms of adaptation and we want to work in partnership with you - both to develop the Programme next year, and to implement it thereafter.
We are working with groups like the Association of British Insurers to assess the best way of engaging the industry to do this. Central government will continue to play its part by providing the evidence, and facilitating and driving action. But it is for all parts of society - businesses, local authorities and communities - to take action to prepare for climate change.
And we are reviewing the provision of Government-funded specialist adaptation advice and support - responding to the statutory Adaptation Sub Committee’s call to ensure that capacity building in adapting to climate change starts to translate routinely into action on the ground.
Later this year, we will publish white papers on the Natural Environment and Water, as well as a new England Biodiversity Strategy - key planks in our drive to prepare the country for climate change.
The Natural Environment White Paper will set out how the natural environment is key to our efforts to adapt to climate change - cooling our air, purifying our water and helping to alleviate flood risk. But that it is also under threat from climate change and must be given every chance to adapt through our policies, initiatives and actions.
That’s why insurance products that adhere to the proposed Principles for Sustainable Insurance will be so important and I whole heartedly support what you’re all here to do today.
And that’s why it’s crucial that big institutional investors consider the protection and the sustainable use of biodiversity and the wider natural environment in their investment decisions.
And that’s why Caroline Spelman fought so hard to make Nagoya such a great success, fully achieving its three main objectives - setting in place:
- a New Strategic Plan for global biodiversity conservation to 2020 and beyond
- a resource mobilization strategy to increase financing for biodiversity outcomes in developing countries; and
- a new “Nagoya Protocol” on Access and Benefit Sharing, which establishes a regime where developing countries will allow access to their genetic and natural resources in return for a share of the benefits for their use.
Biodiversity loss, climate change and development are key, intertwined, challenges and I am heartened to see the UN Environment Programme Finance Initiative and the insurance industry working together to find solutions.