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Lack of data is holding back the financial sector back when it comes to climate risk management

The availability of data is the single greatest difficulty that firms expect to face over the next five years whilst making plans to address climate risk, according to a survey of leading financial institutions by Willis Towers Watson.

In addition to 80 percent of respondents reporting data as their top concern in the transition to a Net Zero economy, difficulty in making quantitative assessments (75 percent) and insufficient expertise in the actions required (62 percent) were also revealed as major challenges.

Conducted as part of Willis Towers Watson’s Climate Risk and Financial Stewardship Summit, the survey polled 122 organizations including global banks, insurers, wealth and asset managers to gain fresh insights on progress made to assess and manage the impact of climate risk on their business.

Looking across the same five-year timeframe, few organizations who took part in the survey expect the level of risk associated with climate change to diminish, with more respondents (40 percent) predicting that today’s level of risk facing their business will escalate over time.

In addition to future challenges, the survey looked at issues senior decision makers are having to deal with right now. Respondents cited transition (75 percent), reputational (63 percent), and social responsibility (57 percent) risks as areas that their organizations are prioritising in order to address climate risks.

Rowan Douglas, Head of Willis Towers Watson’s Climate and Resilience Hub, said: “Future climate risks are unprecedented and systemic, and the magnitude of the challenge is so huge and the moment so late that every lever is being explored to turn economies to meet the Paris targets. While the financial sector is well placed to take a lead, climate-related risk not only needs to be integrated into day-to-day risk management but also to steer the whole economic transition to a low-carbon and resilient future.”

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