Yet, 70% of firms view climate risk as central.
Only nearly a third of insurance firms have dedicated climate risk committees, compared to 63% of banks and 31% of investment firms, according to Fathom’s latest report.
The report, “The Climate Challenge for Boards: Perspectives from the Financial Sector”, revealed varying approaches to climate risk management at the board level within financial and insurance firms. It also highlighted discrepancies in climate risk prioritization and committee structures.
For companies with such committees, insurance firms are the most likely to ensure independence, with 80% of their climate risk committees operating separately from the board.
In comparison, 73% of banks and 72% of investment management firms have independent climate committees.
Insurance firms, traditionally focused on short-term risks, now view climate risk as central, with 70% identifying it as a priority, just below investment management firms at 72%, and well ahead of banks at 50%.
However, only 43% of insurance firms use external expertise for climate risk assessments, compared to 56% in investment management and just 17% in banking.
“This research highlights a significant opportunity for the insurance sector to enhance its climate risk management. Insurance firms would greatly benefit from establishing dedicated committees and improving their data resources to better integrate climate risk into their strategies,” Harry Vardigans, head of Insurance at Fathom said in a media release.
Commissioned by water risk intelligence firm Fathom and conducted by IFI Global, the study examines board oversight on physical climate risk across 92 corporations, including 30 insurance firms, 30 banks, and 32 investment firms.
The report’s findings are based on annual and ESG reports, as well as interviews with 42 senior leaders across these sectors.