Future-Proofing Business: A New View of Risk, Reward, and Impact

How do investors and insurance companies prepare for climate change, aging societies and the other pressing challenges of the next decade? Representatives of Guggenheim Partners, Willis Towers Watson and the Bank of England came together at Goal 17 Partners on Thursday to address these issues and related opportunities.

One takeaway was clear: the conversation has dramatically shifted in the last year, both at Davos and in financial and regulatory circles. Rowan Douglas, CEO of Capital, Science & Policy, Willis Towers Watson, remarked that the forest fires in California and Australia have created a visceral representation of the impacts of climate change, bringing the world at a “social tipping point.” He believes Greta Thunberg and the intergenerational movement she represents have also contributed to this shift.

Michael Sheren, Senior Advisor, Bank of England raised the “tragedy of the horizons”, the disconnect between long term liabilities and short term assets that will be exacerbated by climate change. Future proofing is critical, given that short term assets may have even shorter term returns than many firms currently project.

Jim Pass, Head of Project Finance at Guggenheim Partners, added that these dangers are compounded by persistent low rates and a tight fiscal environment, leading portfolio managers to chase exceptional yields even while the sector’s business model undergoes transition and transformation. 

The mitigate risk and advance climate change resilience and adaptation, the panelists discussed the need to stress test portfolios for extremes and “Black Swan” events.

On a more optimistic note, the moderator— David Lawler, World News Editor, Axios—steered the conversation toward future opportunities. Mr. Sheren encouraged the audience to read the International Energy Agency report on renewable energy that posits that offshore wind technology to the point of meeting all the world’s energy needs by 2040. These developments and new government NetZero commitments represent the “alpha generating opportunity of a lifetime.”

The session concluded with each panelist giving their vision of the conversation at Davos in 2025—with the consensus that these issues will move from dialogue to operational specifics, from climate risk to credit risk.