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Before we get into today’s newsletter, I would like to bring to your attention the report from our climate colleagues that temperature records were broken in October. As if it wasn’t already abundantly clear: 2023 is about to be the hottest year on record.
Today, Kaori reports on a UN team developing insurance to help cities cover the costs of hurricanes, fires and other disasters caused by global warming.
And I write about new research on the increasing emissions from meat and dairy companies. As always, thanks for reading. – Patrick Tempel-West
A new way to take the heat out of climate-related insurance
How can we reverse the exodus of insurance companies from cities vulnerable to climate risks? A team of economists, climate scientists and insurance professionals led by the UN Capital Development Fund is trying to tackle this question.
As extreme weather events become more common, rising costs due to extreme weather events have prompted insurance companies to withdraw coverage in high-risk locations, as we discussed previously.
To reverse this trend, the UNCDF-led team is developing long-term insurance to help cities cover growing bills related to natural disasters. Pilot programs to reduce flood risk are being planned in South Africa and the Philippine city of Makati, Metro Manila.
Under this 10-year insurance plan, which organizers call Climate Insurance Linked Resilient Infrastructure Financing (CILRIF), cities would pay a premium that could be reduced if they invest in climate-resilient infrastructure such as seawalls or wider drainage systems.
Abhisheik Dhawan, sustainable finance and partnerships specialist at UNCDF, compares the attitude around climate insurance to that around our own health: “We are hopeful, so we never think we will ever go to a hospital.”
But threats to infrastructure are increasing due to the effects of climate change. Climate-related catastrophes such as hurricanes and forest fires cost around $120 billion in insured losses and $270 billion in uninsured losses worldwide last year, according to estimates from reinsurance company Munich Re.
However, according to research from the National Institute of Building Sciences, spending $1 on climate resilience is worth $6 in avoided disaster reconstruction costs.
Yet challenges remain for CILRIF to expand beyond the pilot cities to the 100 target cities they have identified. First, the team will need to determine the models to use to determine the premiums, says climatologist Adam Sobel, a professor at Columbia University and member of the CILRIF working group. Sobel emphasized the need for “advanced physical modeling,” as the available models are derived from historical data.
Insurance companies will also need evidence that climate resilience strategies are effective.
“How can the insurer be confident that the intervention actually reduces the risk? How can they ensure that the implementation goes as planned and agreed?” asked Michael McCord, director of the MicroInsurance Center at Milliman, an actuarial and consulting firm. “One of the biggest challenges is to give insurers confidence that these interventions will work,” he emphasizes.
While there are still unsolved pieces of the puzzle, it is another attempt to solve a growing problem. “Hopefully this will open up a new market for insurers. . . without compromising their profitability,” said Dhawan. (Kaori Yoshida, Nikkei)
CO2 emissions by companies
Emissions are increasing at meat and dairy companies
The COP28 climate summit in Dubai is just around the corner, and one of the biggest concerns on this year’s agenda will be the role of agricultural companies in CO2 emissions.
Meat and dairy companies are among the biggest polluters in the world. According to the UN Food and Agriculture Organization, livestock emissions are responsible for 14.5 percent of all greenhouse gas emissions.
In his sixth annual reportThe Fairr Initiative – founded by London-based financier Jeremy Coller to map emissions from meat and dairy companies – found a 3.3 percent increase in emissions disclosed this year by 20 of the largest listed meat companies and dairy producers.
While emissions fell at companies like Tyson Foods and Danone, this was offset by increases at other companies. Danone was one of three dairies added to the Fairr list this year.
“Fairr’s research underlines the urgency with which livestock farmers must act in the transition to more sustainable production,” Oshni Arachchi, head of responsible investing at Danske Bank, said in a statement.
The report examines the role of alternative proteins in reducing CO2 emissions. A total of 25 meat and dairy companies have invested in alternative proteins, Fairr said, compared to just a handful in 2019. While plant-based proteins have lower carbon emissions, companies are investing in these products because of customer demand – not because of their sustainability attributes, Fairr said.
And customer demand may also decline. Beyond Meat, a publicly traded producer of alternative proteins, said Wednesday that U.S. retail sales fell by a third in the third quarter of this year and its stock price fell 40 percent from a year ago.
Fairr’s report comes at a time when European regulators are becoming stricter on CO2 emissions from the agricultural sector. Earlier this month, the Danish Climate Minister said that farmers in the EU will have to pay for their greenhouse gas emissions. Agriculture is the third largest emitter of greenhouse gases in the EU, and could become the largest by 2040 if pollution is not reduced as quickly as other business sectors.
At COP28, companies are expected to come under pressure to accelerate emissions reductions. Lucrezia Tincani, head of policy at Fairr, said the group was hoping for two things at the meeting. First, the FAO should draw up a roadmap to 1.5 degrees Celsius for the agri-food sector, which is in line with the Paris Agreement goal of limiting global warming to 1.5 degrees Celsius. Second, G20 countries must include agricultural emissions reductions as part of their national climate contributions.
“It is clear that food emissions are next to energy at the top of the rankings this year,” Tincani told me. “The foundation has been laid for significant progress in reducing emissions from the agri-food sector. But as always at COP, success is determined at the negotiating table.” (Patrick Tempel-West)
Shell is suing Greenpeace for at least $2.1 million in one of the largest legal claims ever against the environmental group, after its protesters occupied a ship for 13 days earlier this year, our colleague Tom Wilson reports.