Why your capital investments should be backed up by climate change

Why your capital investments should be backed up by climate change | Corporate Risk & Insurance

Why your capital investments should be backed up by climate change

When a business is mulling a large capital investment, for example building a new factory or opening a new office, climate change data might not spring to mind as the most important risk factor to consider.

But that’s exactly what risk managers should be urging their organizations to consider before pumping cash into new areas, says a major commercial insurer.

Businesses today need to take a long-term, strategic view when it comes to the future effects of climate change and how it could impact any investments they make, says Ted Stuckey, managing director of QBE Ventures.

“If I’m making a large capital investment as a business, perhaps I’m building a new development or warehouse, what is the impact of climate change on these specific areas going to look like over time?” he said in an interview with Corporate Risk and Insurance.

A wide range of factors, from the likelihood of extreme temperatures to the possibility of exposure to hurricanes or tornadoes, need to be considered in order to create the right infrastructure.

“[Businesses need to think about] how they can make smarter, long-term, strategic decisions for their capital investment, based on the most recent and accurate scientific data modelling capabilities around these climate-related perils,” he said.

Stuckey stressed that it’s not just the immediate risk of perils from climate change that need to be on an organization’s horizon.

“It’s both sides of the equation that we feel businesses really need to continue to become more and more advanced on. That’s in terms of how they are responding to these events, and how they are planning to ensure that in the long-term they are making capital investments in the right area, and in an area that’s not going to be highly susceptible to these types of perils,” he said.

QBE Ventures recently announced a partnership with Jupiter, a specialist in predicting and managing climate risks, which is part of a push from the insurer to look at climate-related risks.

“While that commitment is really a long-term journey, we’ve made really good progress over the last 12-18 months by strengthening things like our governance structure and increasing our focus on climate-related risks across our business,” Stuckey said.

“Ultimately, we know that climate change is increasing the frequency and severity of these types of events. The name of the game is resiliency, and this type of data is going to help our insureds and it’s going to help us make better decisions around these types of perils.”