Aon partners with climate specialist to help clients grasp the impacts of climate change

Broker Aon has unveiled a collaboration with The Climate Service, a business that measures and monitors the financial impacts of climate change on businesses and investments, to help its clients better understand the impact on their own operations and portfolios.

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 novel coronavirus (COVID-19) 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 assess the financial impacts of climate on business and investments. The combined service brings together complementary analytics with a climate focus.

The companies will offer clients a range of services, some of which will use the Climate Service’s Climanomics platform, which 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.

The firms will also analyse clients’ data to create a customized risk framework with actionable recommendations as well as advising clients on their long-term balance sheet resilience using capital through risk transfer and/or asset placement.

Greg Lowe, head of resilience and sustainability at Aon, commented: “As we support our clients with their insurance placements, we are very much aware of the immediate physical damage to an asset and the financial impacts to supply chains, customers and investors. We are excited that our collaboration with The Climate Service will drive greater awareness of climate risks and the opportunities for clients to reduce earnings volatility and improve balance sheet resilience.”

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.”