Dear ladies and gentlemen,
I’m glad to be welcoming so many of you to today’s event. Without a doubt, sustainability is becoming a point of interest to many across the financial sector. Firms have been gradually waking up to the realization that a sustainable way of operation is not only trendy in that it appeals to customers, but also often key to the survival of their businesses.
Throughout today’s event, we will be going below the surface of sustainable finance to discuss an aspect of it which, to my mind, is crucial if we want the sector’s fight against the ravages of climate change to be successful.
EIOPA, alongside other financial regulators and supervisors, is committed to helping financial entities pull their weight in tackling climate change. We have come out with an ambitious sustainability agenda and have been making gradual progress for the creation of a more forward-looking sector, a more resilient society and a more livable planet.
When it comes to sustainable efforts, regulators and supervisors usually come to the industry with new sets of rules, new guidance and new disclosure or reporting regimes – but not today. Today is different.
We have come together to unveil a tool that we hope will support you in your endeavors to better measure climate change-related risks as well as the potential losses arising from them.
Those of you in the audience who ever tried building a piece of furniture or even a simple bird feeder will know the importance of “measuring first and cutting once.” Even with these relatively simple tasks, the end results can look interesting if not outright dreadful without accurate measurement.
Measuring climate change is infinitely more complicated than that. Failing to find the right tools and failing to use them appropriately will not result in interesting-looking rocking chairs or misaligned tiles: it will lead to misjudged risks, wrongly allocated resources and little clarity on how to adapt to and mitigate one of the greatest crises facing humanity.
In order to mitigate the negative effects of climate change through insurance underwriting and investment, we need better data and better tools than what’s currently available.
It’s for this very reason that EIOPA decided to include the promotion of open-source modelling and data among our key areas of activity in EIOPA’s 2022-2024 sustainable finance roadmap.
Before explaining how we plan to promote open-source, let me give a brief overview of the challenges we face in this area.
Access to good data and modelling is the cornerstone of insurers’ action against climate change. What we see, however, is that data and models are still very difficult to come by. Issues with data and model availability is something that EIOPA is concerned with, and we’ll be looking at ways to fill these gaps related to climate change risks as much as possible.
Aside from data gaps, even when data or models are available, there are obstacles to using them.
One such obstacle has to do with user-friendliness. The sustainable finance specialists of financial entities are not alone with their interest in weather patterns, flood levels, the lengths of droughts and the frequency in wildfires in certain areas. Meteorologists, climatologists, agricultural scientists and professionals in a host of other fields have kept tabs on weather patterns relevant to their business for decades. There are therefore pools of freely accessible climate-related data and models out there, but using them may not be the most straightforward. Unstructured interfaces often make these sources difficult to use to outsiders. This means that while useful data has been collected and models have been created, by and large, they go unused or underused on account of their complexity of handling.
Another obstacle that a sustainable finance specialist looking for data or models can run up against is price. Well-organized, useful data and modelling is often kept behind paywalls and not all companies can afford to pay for them. While some bigger corporations will likely be able to bear the costs, small and medium-sized entities in particular may end up being priced out of such solutions.
Data and models on climate-related risks are crucial to improve the accuracy of climate risk assessment for the ultimate benefit of policyholders as well as of industry, the supervisory community and the public sector in general. Insurers of every size and nature are needed to confront this challenge.
Climate change affects us all and the ability to stand up against it should not depend on whether or not data is available and at what cost. We at EIOPA believe that it’s important to unite around this common challenge by sharing expertise and data as widely as possible.
EIOPA has therefore decided to step into this space with the objective of making more and better models available. We are also eager to position ourselves as a data hub for relevant open-source data on risks related to climate change.
Our goal is to build a bridge between climate scientists and the world of finance and make open-source data more programmatically useable in our field. There are multiple benefits to be had here. Bringing these two worlds together and making the data more accessible can increase innovation, democratize the use of natural catastrophe models, reduce the cost of running assessments and raise awareness of the risks in general.
The first step in our endeavor to make natural catastrophe modelling available to all is a new user interface, a new tool: the Climada App.
The tool we’re unveiling today is the fruit of a successful collaboration between EIOPA and the Eidgenössische Technische Hochschule (ETH) Zürich, more specifically, the team working on Climada.
Climada is a state-of-the-art catastrophe model developed by the Swiss university. It provides a global coverage of major climate-related extreme weather hazards from cyclones and river flood to drought, including rich historical and probabilistic event data sets at distinct time horizons. And all of this is available in open-source. Using it, however, is not necessarily the most straightforward for everyone as users have to work directly in code to run analyses.
To overcome this barrier and facilitate the use of Climada among a wider circle of users, EIOPA has decided to create a graphic user interface that transforms Climada’s data treasure chest into a handy platform, the Climada App, where no coding experience whatsoever is required.
The layer EIOPA has brought to Climada’s wealth of data therefore offers a practicable, user-friendly interface to all those that are striving to better assess climate-related risks and develop preventive and adaptive solutions.
At today’s debut of the Climada App, we’re inviting you all to dive in and play around with it, download it, use it, share it, modify it all you want.
It’s a free software that we hope will bring high-quality, accessible, user-friendly catastrophe modelling to those that previously couldn’t afford to run them or were stupefied by the complexity of available solutions.
To support you in your first attempts with Climada, in addition to the software itself, we are also releasing a guide with instructions. This user manual will help you better understand the tool and advise you as you develop into an independent user.
We very much hope that your journey with the Climada App will be informative, and that the application will make a positive difference in how you approach and measure climate-related risks.
We also hope that EIOPA’s Climada project will encourage further developments in catastrophe modelling and support stakeholders with their initial experiences in this emerging field.
Our ambition for this app is to pave the way for the broader use and development of open-source models so that firms small and large can conduct climate risks assessments. At EIOPA, we are already planning to leverage the tool in an upcoming study looking at the impact of flood risks for the insurance sector.
We will continue to engage with the insurance industry in the area of open-source data and modelling by considering other initiatives and by working toward providing more easily accessible climate-related data for all.
I want to thank you for tuning in for the start of today’s event. I’m happy to say that we have a handful of speakers lined up who are eager to speak to us about their own climate-risk-related initiatives. I’m very much looking forward to hearing their stories and I hope they will inspire you to get more involved in climate risks measurement.
Enjoy the sessions and make sure not to close your laptops at the end of the day without giving the Climada App a good, thorough look!
Details
- Publication date
- 16 May 2023