South Africa’s private sector has amplified its voice for meaningful climate financing at the World Economic Forum Annual Meetings 2023 in Davos, as the world grapples with the most devastating impacts of severe weather conditions due to climate change.
This comes as the United Nations UN Secretary-General António Guterres urged world leaders to take urgent action as the world was “looking into the eye of a Category 5 storm”.
Guterres called on world leaders to put forward credible and transparent transition plans to achieve net-zero emissions and to submit their plans before the end of the year.
“The transition to net zero must be grounded in real emissions cuts – and not rely essentially on carbon credits and shadow markets,” he said.
“That’s why we [the UN] created an Expert Group on Net-Zero Emissions Commitments.”
The 2023 Global Risk Report released at the WEF ranks the failure to mitigate climate change risk as the most severe risk in the next 10 years and the risks resulting from extreme weather events as the second most severe risk in the next two years.
The insurance industry is one of the most severely impacted businesses when it comes to the effects of climate change and natural disasters, ranging from fires, floods, to droughts.
Old Mutual Insure’s chief actuary, Ronald Richman, who was at the WEF 2023, said they were seeing both the frequency and severity of catastrophe events rising over the past several decades, which is in line with global trends observed by the international insurance industry.
Richman said in South Africa, the frequency of large catastrophes has increased by around 50% in the decade from 2012-2022 compared to the preceding decade.
“The average annual size of catastrophe claims has increased tenfold in the same period, due to extremely destructive events such as the Knysna fires and the KwaZulu-Natal floods.
“Along with these major catastrophes, we are also seeing an increasing frequency of smaller destructive events, sometimes in regions with little historical record of similar occurrences.”
Stakeholders have been discussing the main forms of climate finance in the form of loans at concessionary interest rates and funding for loss and damage.
Old Mutual Insure is actively managing climate change risks through a programme of data and actuarial analytics, designed to help quantify the trends in climate related weather events and to enable the company to more accurately quantify and price risk.
Richman said financial institutions in South Africa were successfully placing climate and social linked instruments on the JSE, providing financing for climate related initiatives.
“Our view is that these instruments will enable green ventures in South Africa, for example, renewable energy installations and green hydrogen production, while enabling new initiatives such as residential developments incorporating solar installations,” he said.
“Whereas issues of climate justice are beginning to be articulated, we view the introduction of these forms of climate finance as an important component of the just transition, providing support to countries that are suffering from climate change impacts.”
BUSINESS REPORT