Financial regulators across the world, including in Canada, the European Union, Hong Kong, Japan, Singapore and the UK, are setting guidelines to manage the effects of climate change on financial stability and build on the work of the Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures (TCFD). This further compels businesses to measure and manage climate risk but often they do not have the tools to quantify the key parameters.
The COVID-19 pandemic has tested the resilience of economies and is providing a good example of how systemic changes can impact financial, economic and social stability. To better prepare companies across all sectors for the impact on climate, Aon has entered into an exclusive broker relationship with The Climate Service (TCS) that combines science and technology to measure, monitor and manage the financial impacts of climate on business and investments. The combined service brings together complementary analytics with a climate focus and comprises:
- Scenario Analysis: Firstly, client data such as property location, type, value and greenhouse gas emissions are uploaded to The Climate Service’s Climanomics® platform. It then runs different climate scenarios to explore the impact of physical risks such as changes in temperature, flooding and wildfire as well as ‘transition’ risk including shifts in carbon pricing, law and reputation – which are aligned to the TCFD framework.
- Customized Recommendations: Aon’s analysts interpret the data to create a customized risk framework with actionable recommendations, outlining how changes in financing strategies can help mitigate climate-related impacts.
- Balance Sheet Optimization: Next, Aon will look to optimise the client’s long-term balance sheet resilience using capital through risk transfer and/or asset placement. Aon will also explore new capital solutions where the Climanomics® platform has raised challenges that are not addressed by the traditional markets.
While the Climanomics® platform is currently used by asset managers, Aon identified an opportunity to broaden the reach of these insights to risk managers and accelerate the firm’s ability to support clients in a broader set of industries.
Aon is committed to helping clients leverage emerging technologies and new ways of working that advance their strategic initiatives. This offering is part of Aon’s technological evolution to deliver new products that meet clients’ needs today and tomorrow, in a transparent and efficient way, through innovative collaborations.
James McMahon, CEO of The Climate Service, commented: “As climate risk reshapes financial and insurance markets, support for the Taskforce on Climate-Related Financial Disclosures continues to grow along with the demand for tools to measure and manage climate risk. Through our collaboration with Aon, we are excited to scale our offering of actionable, financial insights based upon the most advanced climate science available, with the goal of helping organizations move from business as usual to action.”
Aon plc (NYSE: AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.
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About The Climate Service
The Climate Service provides climate risk analytics to investors and businesses with support from an unparalleled scientific team and advisors including four IPCC Nobel Prize-winning scientists. The TCS Climanomics® analytics platform enables reporting and disclosure consistent with the TCFD framework and empowers decision-making by putting a price on both transition and physical risk. With multiple climate scenarios covering present day to the year 2100 and ‘one-click’ property/asset and portfolio-level analysis, insights from the platform help investors and businesses manage risk, build resilience, and drive change.
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The Climate Service