1. ¹Director, Andlug Consulting. E-mail: andlug@hotmail.com
2. ²Head, Weather/Climate Risks Research, Munich Re.

^*This article is largely based on a recent major study Climate Change and the Financial Services Industry by the United Nations Environment Programme Finance Initiative, through its Climate Change Working Group. The work was carried out by Innovest Strategic Advisers, under the guidance of Dr Andrew Dlugolecki. The complete study is available for download at: www.unepfi.net

Abstract

Climate change poses a major risk to the global economy. The increasing frequency of severe climatic events, coupled with the unwise nature of economic development, has the potential to create unsustainable levels of damage for the commercial and public financial sectors. The greenhouse gases that create this problem are long lived, so action is urgently needed. The Kyoto Protocol is an important step, but it does not go far enough. A long-term international political framework is required based on the principles of precaution and equity. This can be achieved most effectively through market solutions. The financial sector has a key role to play but there are cognitive, political, analytical and operational barriers. These obstacles can be overcome by creating a focus for key actions, and through close collaboration with policymakers.