The four-day summit, held September 20-23, and themed “Shaping an Equitable, Inclusive and Sustainable Recovery,” provided a timely platform to address the most critical areas of debate, articulate pathways for action, and mobilize leaders and organizations to work together to accelerate progress.
Willis Towers Watson took part in three sessions, with a strong focus on building greater resilience to climate and other global risks.
The first session, “A New Compact for Resilient Economies and Societies”, explored how the continued impact of COVID-19 and the climate crisis have highlighted the urgency to invest in resilience, especially for the most vulnerable communities, and to be better prepared to mitigate, withstand and recover from future shocks.
Building greater resilience has become a defining mandate of our time and, in order to prepare for the future, the private and public sectors must more proactively partner to reorient investments and strengthen risk mitigation strategies.
Speakers included Mirek Dusek, Deputy Head of the World Economic Forum Centre for Geopolitical and Regional Affairs; Mari Pangestu, the World Bank’s Managing Director of Development Policy and Partnerships; Peter Maurer, President of the International Committee of the Red Cross; Sara Pantuliano, Chief Executive of the Overseas Development Institute; and John Haley, CEO of Willis Towers Watson.
Key takeaways from the session were:
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A shift in mindset is needed, from prefabricated solutions to designing responses based on the resilience of people and their communities. If we remain divided and fragmented, working in silos, it will not be possible to accurately measure impact, which in turn will block patient – and impatient – capital.
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The panel also warned that there was a vanishing window of opportunity to rise to this transformational change, which if missed would lead to serious social consequences.
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The intensity and frequency of shocks and crises are increasing, and it is now widely accepted that investing in prevention and preparedness is essential to reducing the cost and damage when disaster strikes. The session addressed how best to build incentives for both governments and the private sector, with insurance and, more specifically, the need to collaborate and design better analytics, standards and risk measurements to model these risks, cited as one solution.
John Haley: “The basic risk profile is shifting. With so many more long-tail risks today compared to 20 years ago, we need a common analytical framework with a consistent view of exposure that is shared, with a global view, irrespective of region, industry or institution. This is what the Coalition for Climate Resilient Investment is working on – a transparent global risk model and platform that everyone can support.”
“This is what the Coalition for Climate Resilient Investment is working on – a transparent global risk model and platform that everyone can support.”
John Haley | CEO of Willis Towers Watson
The second session, “Outsmarting Uncertainty for the State of Florida,” looked at a new approach being pioneered in partnership with Willis Towers Watson to evaluate and build resilience to the state’s top risks.
Willis Towers Watson is working with the State of Florida on a new process to evaluate a wide range of extreme risks.
Willis Towers Watson is working with the State of Florida on a new process to evaluate a wide range of extreme risks. This process puts all of Florida’s top risks, including climate and weather, cyber, water, socio-economic and human capital in a single decision framework that covers potential adverse events and mitigating actions to be taken over the next 10 years.
Florida, like every organization, has limited investment capacity, making the ability to effectively prioritize risk investments and actions critical.
Speakers included Chris Sprowls, Speaker of the Florida House of Representatives; Carl Hess, President and, beginning January 1, CEO of Willis Towers Watson; Rhea Law, Interim President, University of South Florida; and Eric Silagy, President and CEO, Florida Power and Light. Moderated by Lisa Lipuma, Director, Risk and Analytics at Willis Towers Watson.
Chris Sprowls: “Even in a state like Florida, with a $101 billion budget, funds are still limited. We have to prioritize and say where can we move the needle based on our investment, and this is where we look at this ‘efficient frontier’ philosophy. The reality is that every organization is making these decisions already, but without an objective framework to do so.”
By applying risk management concepts most commonly used to guide corporate risk intervention investments and protect private capital, Willis Towers Watson developed a framework that guides the state’s investments to mitigate risks and protect public capital over the long term.
“Most big risks are uncorrelated; the drivers are independent, and they do not happen at the same time.”
Carl Hess
President of Willis Towers Watson
Carl Hess: “Most big risks are uncorrelated; the drivers are independent, and they do not happen at the same time. So just as you consider diversification in your investment portfolio – risk mitigation works the same way. By looking at all risks and mitigating actions at once on the same page you ensure a far more efficient allocation of your limited capital.”
The session looked at the critical need for governments and corporations to break out of fire-fighting mode by strategically identifying and assessing risks over a 10-year timeframe that moves past the next election or quarterly cycle.
Chris Sprowls: “Let’s not wait until a disaster happens. Let’s try and predict the disaster in advance and figure out the most efficient way to get ahead of it, to tackle it and avoid that disastrous situation.” He gave this year’s Piney Point disaster as an example of an avoidable crisis that legislators were forced to respond to. Polluted water from the abandoned phosphate plant had to be pumped into Tampa Bay in order to prevent flooding of nearby neighborhoods and pollution of adjacent pristine freshwater bodies.
The increasing ability to harness Big Data, predictive modeling and machine learning are key to making better risk decisions.
Rhea Law: “It’s easier to make decisions in the light of day when you are basing your decisions on data and analysis, than when you are in the middle of a disaster.”
Eric Silagy: “Mother nature will always throw curve balls at you. So, as a provider of electricity for more than half the state of Florida, we have to be prepared for everything that can be anticipated so that we have the bandwidth to deal with the unexpected. This means a more holistic, long-data approach to risk management, and this comes down to culture, because you can’t just talk about it or make a list; you have to live it every single day.”
The final session, “Resilient Investment Solutions: Private and Public Perspectives,” showcased the pioneering work of the Coalition for Climate Resilient Investment in managing physical climate risks.
Willis Towers Watson's Carlos Sanchez addresses private and public perspectives of resilient investment solutions in his role as executive director for the Coalition for Climate Resilient Investment.
Launched in 2019 by Willis Towers Watson, the World Economic Forum, the Global Commission on Adaptation, and the UK Government, the Coalition for Climate Resilient Investment (CCRI) is focused on mobilizing collaboration across industries and regions to support the more efficient allocation of capital for resilience. This session explored the specific and distinctive, yet complementary, needs from public and private actors with regard to resilience investments.
Speakers included Chris Dodwell, Head of Policy and Advocacy, Impax Asset Management; Samir Assaf, CCRI Co-Chair and Chairman, Corporate and Institutional Banking, HSBC; Alicia Seiger, Co-Chair at State of California Climate-related Risk Disclosure Advisory Group; Dr. Wayne Henry, Director General, Planning Institute of Jamaica, Government of Jamaica; Ian Galbraith, Group Head of Strategy, Mott MacDonald; and Carlos Sanchez, Executive Director, CCRI.
The panel discussion revealed that companies across industries are not looking at physical climate risks in a systematically comparable way, which means adverse consequences are yet to be priced in. This further underlines the value of CCRI’s work, which is both collaborative and pre-competitive, and brings together a wide variety of institutions to design the common analytical tools needed, work out the data requirements, price physical climate risks properly, and ultimately address this market failure and price assets accordingly.
Samir Assaf: “Resilience, transition and sustainability are interlinked. Our job at CCRI is to make sure that whoever is investing in infrastructure is doing the right math from a cashflow perspective and properly understands the return on investment.”
The state of California recently published a ground-breaking report on how it can address the immense challenges posed by climate change, with more than 45 infrastructure and financial disclosure recommendations focused on California’s $262 billion operating budget and the combined $1 trillion in assets under management across the state’s three biggest pension funds.
Alicia Seiger: “The report was ground-breaking in developing climate-related financial disclosure practices in a government context for the first time. CCRI played a central role in helping our group translate climate-related information into the state’s budget and procurement decision-making processes. The evolution in data and granularity of scenario analysis, in particular, is enabling the understanding of localized impacts. These tools, together with CCRI’s frameworks, provide valuable assistance when coordinated among the right people and places.”
A key recommendation from the report is for California to adopt CCRI’s model on asset design and structuring as an “ideal framework for the necessary disclosure of physical climate risks and the interpretation of these risks in cashflow modeling practices.” This framework will allow the development of climate risk disclosures that impact decision making, enabling the state to better manage climate risk and steward the expenditure of taxpayer dollars.
“Resilience is increasingly being considered not simply as an additional cost or safeguard, but rather as a source of competitive advantage for countries, companies and investors.”
Carlos Sanchez | Executive Director, CCRI
Carlos Sanchez: “Resilience is increasingly being considered not simply as an additional cost or safeguard, but rather as a source of competitive advantage for countries, companies and investors. With that we are completely changing the narrative.”
Small-island, developing states are among the most vulnerable in the world to the adverse impacts of climate events, which are becoming more frequent and intense. For this reason, building climate resilience is a key part of Jamaica’s Vision 2030 National Development Plan from a business continuity standpoint and to safeguard quality of life. Central to this program has been Jamaica’s decision to be the first pilot country for the development of a systemic risk assessment tool to more accurately identify and quantify risk around the island’s physical assets. This will significantly reduce uncertainty, allowing better targeted interventions and planning, which is critical.
A final key consideration, highlighted by Ian Galbraith, is when to introduce resilience. “Clearly it is always better to do this from day one, but most of our assets are existing assets, making the cost of intervention and introducing mitigations onto built assets a complicated affair.”
