【Tokio Marine Nichido Global Warming Seminar: "Role of Finance and Insurance in Response to Climate Change"】
On November 18 2008, the above seminar was held jointly by the Asahi Shimbun, Tokio Marine & Nichido Fire Insurance Co., Ltd. and the Tokio Marine Research Institute at Roppongi Hills, Tokyo, with the co-sponsorship of UNEP FI.
In the increasing worldwide concern over the problems of climate change and global warming, the seminar was held on the theme of the "Role of Finance and Insurance in Response to Climate Change", by inviting specialists in various fields including literates from within and without Japan, business leaders, the media, etc., asking them to speak from diverse viewpoints and giving a panel discussion. At the same time, the Asahi Shimbun gave an exhibition of photographs of extraordinary occurrences on the earth and Tokio Marine & Nichido showed snapshots of its mangrove afforestation project on the panels.
At the beginning of the seminar, Mr. Shuzo Sumi, President of Tokio Marine & Nichido, spoke that the problems of climate change and global warming are important issues affecting management seriously and that, as an insurance company offering safety and security and also as one of good corporate citizens, it is his firm intention to play an active role towards the prevention and mitigation of global warming, in cooperation with overseas insurance companies. And, Mr. Tsuyoshi Nagano, Managing Director of Tokio Marine & Nichido, concluded the seminar by saying that as a non-life insurance company we are determined to fulfill our responsibility and role in response to global warming in the core area of providing our customers with insurance products and services.
(Opening address)
1. Program
13:30-13:40 Opening Address
Shuzo Sumi, President, Tokio Marine & Nichido Fire Insurance Co., Ltd.
13:40- PART 1 Speech
"Climate Change and its impacts on Human Society from a Scientific Viewpoint"
Dr. Teruyuki Nakajima, Professor and Director, Center for Climate System Research, The University of Tokyo
"Paradigm shifts in Corporate Activities toward the realization of Low-Carbon Economy"
Mr. Atsushi Komori, Senior Staff Writer, Economic News Department, The Asahi Shimbun
"Climate change and the role of finance and insurance: With a focus on adaptation"
Mr. Paul Clements-Hunt, Head, The UNEP Finance Initiative
"Current Situation and Future Possibility of Emission Rights Purchase Business for Japanese Corporations, and Climate Change and Role of Finance"
Mr. Koichiro Fukui, President, Japan Carbon Finance, Ltd.
"Role of Insurance against Natural Disasters in Response to Climate Change"
Mr. Terumasa Miyoshi, Managing Director and Senior Research Officer, The Tokio Marine Research Institute
16:40-17:10 PART 2 Panel Discussion
"Role of Finance and Insurance in Response to Climate Change"
Moderator: Mr. Peter David Pedersen, Chief Executive, E-Spuare Inc.
Panelists: Dr. Teruyuki Nakajima, Mr. Atsushi Komori, Mr. Koichiro Fukui, and Mr. Terumasa Miyoshi
17:10-17:15 Closing Speech
Tsuyoshi Nagano, Managing Director, Tokio Marine & Nichido Fire Insurance Co., Ltd.
2. Summary of the lectures
"Climate Change and its impacts on Human Society from a Scientific Viewpoint"
Dr. Teruyuki Nakajima, Professor and Director, Center for Climate System Research, The University of Tokyo
Science has virtually proved that increases in the emission of CO2 and air-pollutants arising from human activities have given rise to climate change like global warming and the like. In this sense, the days of proving global warming are already over. Now it is necessary to develop models by which we can simulate the formation of clouds, precipitation, snow ice, and the like at high levels of accuracy. It will be effective to apply such models to the evaluation of natural disasters such as localized downpours, droughts, typhoons, etc. which give a serious impact on society, as well as to the designing of social infrastructures.
At the same time, we are required to realize a transition to a low carbon society for the purpose of mitigating effects of global warming. This is an issue which should be dealt with in collaboration of political leaders, the general public, business corporations, policymakers and academic circles. The academic circles present technical knowledge, and political leaders should take leadership on the basis of such knowledge, change mentalities in society and establish a social system under which people buy eco-friendly products and services from enterprises. All of us should make efforts to develop and keep this cycle going.
For the above purposes, industry-university collaboration has crucial importance. Since academic circles present models, business corporations are requested to look into the effectiveness of such models, make use of them and create new business models.
"Paradigm shifts in Corporate Activities toward the realization of Low-Carbon Economy"
Mr. Atsushi Komori, Senior Staff Writer, Economic News Department, The Asahi Shimbun
Faced with the need to respond to the problems of limited earth resources and climate change, it has become essential for business corporations to shift its resource-consuming and carbon-emitting types of activities to recycling-oriented and low-carbon types of activities. As one of the examples of efforts in that direction, we can cite the growth of the solar cell industry.
We should recognize the fact that in the ecosystem called the earth we have passed the age when the economic scale of human activities was small and, as a result of the expansion of the scale, are going beyond the boundaries of the system. A paradigm shift is requested of business corporations.
It is finance that has supported the expansion of the economic scale so far. Finance is often referred to as the bloodstream of economic activities. In the future how should we circulate funds in the given ecosystem of the earth and how should we support industries and business corporations? A new paradigm shift is requested also of finance.
"Climate change and the role of finance and insurance: With a focus on adaptation"
Mr. Paul Clements-Hunt, Head, The UNEP Finance Initiative
The UNEP Finance Initiative is a global partnership between UNEP and 177 financial institutions around the world. As part of its activities it has been making suggestions to policymakers in the framework of the UNFCCC Conferences of the Parties.
In the 13th Conference of Parties (COP13) which took place in Bali in December 2007, a resolution was made on the Bali Roadmap defining the deadline and essentials for establishing the framework of activities in 2013 and the subsequent years. In the resolution, it was pointed out that, in coping with problems of climate change, adaptation would be as important as mitigation which had been a focal point in the past. The insurance industry is expected to play an important role in the field of adaptation. The insurance industry is called upon conveying relevant information to the policy makers towards an agreement in the upcoming COP15 in the year 2009.
The world financial crisis has seriously impactted the financial and insurance industries. They stay firm, however, in their determination to combat climate change issues. In the minds of sensible business leaders, transition to a low-carbon society is not regarded as a threat or increased costs but as a business opportunity towards the introduction of new technologies.
Lastly, I would refer to the commitment made by Tokio Marine Nichido to continue its mangrove afforestation project for the next 100 years. What is needed now are a declaration of vision like this and strong leadership to carry it through.
"Current Situation and Future Possibility of Emission Rights Purchase Business for Japanese Corporations, and Climate Change and Role of Finance"
Mr. Koichiro Fukui, President, Japan Carbon Finance, Ltd.
<Emissions trading business now>
In emissions trading business EU-ETS (The European Union Greenhouse Gas Emission Trading Scheme) which started earlier commands the majority of transactions in the market, followed by the CDM (Clean Development Mechanism) agreed upon in the Kyoto Credit which is still in the stage of trial and error, although it has made promising growth. In the circumstances where supply and demand on the CDM have become tight because of several bottlenecks, AAUs (Assigned Amount Units) in Eastern Europe and the old Soviet Bloc having powerful potential have become tradable at last in the form of the GIS (Green Investment Scheme).
<Role of Finance in Preventing Climate Change>
Against climate change, finance performs its role mainly in the field of measures for mitigation. Methods for mitigating effects of climate change include regulations, taxation, surcharges, emissions trading, financial means, research and development, etc. Each of these, however, has advantages and disadvantages. Concerning the choice between the carbon tax and emissions trading, both of which are effective measures for mitigation, the current trend in the world is moving in favor of emissions trading on the assumption of the existence of the worldwide emissions trading market. The system of emissions trading is criticized, however, for lack of fairness in the allotment of quotas. In the EU which started transactions earlier than in other regions, the tendency is more in the direction of making the technical choice of using alternative fuels rather than in introducing effects of low-carbon technologies. It is necessary to make use of finance to direct the investment activities of individual business corporations to the research and development of low carbon technologies and to low carbon businesses. In Japan, the Development Bank of Japan, Inc. has introduced, for the first time in the world, the system of investment according to ranks in environmental grades.
I believe that, in the system of financing conditions for environmental problems, it is a direction we should take to increase the relative importance of responsiveness to climate change.
"Role of Insurance against Natural Disasters in Response to Climate Change"
Mr. Terumasa Miyoshi, Managing Director and Senior Research Officer, The Tokio Marine Research Institute
For insurance companies which accept risks, it is most important to assess risks from objective and scientific viewpoints and to be prepared for the possible worst scenario. The assessment is made on the basis of statistical data but we find it difficult to respond to risk changes (aggravation) by means of the inductive method of foreseeing the future according to past facts. Hurricane Katrina in the U.S. was a case of misreading the possible worst case which resulted in the failure of offering stable insurance coverage and we should learn a lesson from this calamity.
The Tokio Marine Group has been making joint research with the Center for Climate System Research of the University of Tokyo having climate models at top levels in the world, has developed evaluation models of its own based on the collaboration and has started an initiative for studying future risk scenarios.
Developing countries, especially those in Asia, are the regions most prone to climatic disaster risks; they are weak economically and are susceptible to injuries; and their infrastructures and insurance systems are insufficient. The insurance industry in Japan considers it a duty to support those developing countries. In doing so, however, we find it important to make a division of roles between the establishment of infrastructures for prevention of disasters and the development of insurance systems; that is to say, collaboration between the official and private sectors is indispensable. There is a limit to what a single company can do in terms of capital and we cannot do without cooperation with overseas insurance companies. The Geneva Association composed of insurance companies in and out of Japan has started discussion on this subject. .
The Tokio Marine Group accepts weather insurance for farmers in India. This kind of agricultural insurance can be regarded as an example of support for developing countries. And, a technological transfer to developing countries is a key to solving problems of climate change in those regions. We expect that Japanese manufacturers having excellent environmental technologies will participate actively in CDM projects in developing countries. On the part of the Tokio Marine Group also, it is our firm intention to support projects of technological transfers to those countries, by way of accepting CDM-related risks.
(A photo of Speech)
3. Summary of the Panel Discussion
Moderator: Mr. Peter David Pedersen, Chief Executive, E-Spuare Inc.
Panelists: Dr. Teruyuki Nakajima, Mr. Atsushi Komori, Mr. Koichiro Fukui, and Mr. Terumasa Miyoshi
We conducted the panel discussion on the two themes of "What can we do in Japan?" and "What can developed countries do for developing countries" in response to climate change, by encouraging opinions and suggestions from among the audience. The discussion was very lively and constructive. Mr. Peter D. Pedersen, moderator, closed the seminar by wrapping up the session.
(1) Main opinions (an extract)
Theme 1: "What can we do in Japan?"
Mr. Pedersen:
The scale of business is on the increase in both the emissions trading market and the renewable energy market in the world. It seems to me that green investment will become the main current in Japan also. I am wondering about the role which finance can play in such circumstances.
Mr. Fukui:
We expected that, with the ratification of the Kyoto protocol, Japanese excellent technologies would be transferred more to developing countries, to the reduction of CO2 emissions. However, the result fell short of our expectations because of various problems which stood in the way and it is my hope that the obstacles, which are various, will come to be cleared gradually. Japan should learn from this experience and make continued investments in developing countries towards the realization of a low carbon society.
Finance should fulfill its expected role so that excellent new and energy-saving technologies may come to be utilized fully.
Mr. Pedersen:
From what viewpoints will insurance companies respond to risks arising from climate change in the future?
Mr. Miyoshi:
It is the business of insurance companies to accept risks. Japan has often been exposed to natural disasters and we have accumulated knowledge and experience to respond to them. The most important viewpoint is, I think, to have an accurate view of the situation which climate change gives to natural disaster risks.
Theme 2: "What can developed countries do for developing countries?"
Mr. Pedersen:
May I understand that effects of climate change are apt to manifest themselves, particularly in areas where social infrastructures are weak?
Dr. Nakajima:
This issue comes from the problem of population. It is true that a large population gives rise to global warming, and it is also true that densely-populated areas are more susceptible to effects of climate change. We should develop new technologies which enable us to mitigate such effects and adapt ourselves to them, create new employment opportunities and get the economy running its course smoothly. In this sense, economic mechanisms play a very important role in the mitigation of global warming.
Mr. Pedersen:
In developing countries there is a diversity of risks arising from climate change. Is it possible for an insurance company to accept such risks single-handedly?
Mr. Miyoshi:
In the world there are about 2,600 million people who live on 2 dollars or less a day and 1,200 million people who live on 1 dollar or less a day. Most of them are in Asia. By way of making compensation for life for them, I think it would be good if we could devise an insurance scheme of accepting small lots of risks at small premiums. There are many developing countries which are in agricultural or light-industry stages, and the offer of coverage against agricultural damage would be a big point we should consider. These are what come up to mind from my sense of direction.
On the other hand, natural disasters are risks having extraordinary impacts. There are limits to what private companies can do in terms of their capital strengths and the division of roles between the government and private sectors is indispensable. In designing insurance programs, meteorological details are very important and it is necessary that meteorological agencies should get involved in countries where data are insufficient and that efforts are made to prepare them in good order.
Mr. Pedersen:
Is it possible that Japan leads a paradigm shift to a nation contributing to the earth?
Mr. Komori:
Japanese companies have recovered from the collapsed bubble economy and continued to be prosperous in recent years. The important point we learn from this fact, I think, is that they have made good use of the opportunities offered by the economic growth in developing countries. I would like all of you who lead the Japanese economy to fulfill your duties in the respective positions. Also, I would expect Japanese companies, which have top-class energy-saving technologies in the world, to ask their customers and/or suppliers to take initiatives responding to environmental problems by imposing certain duties on them.
(2) The Moderator's Wrap-up
Mr. Pedersen:
In the world of finance, we are filled with dismal news these days, but I have no doubt that every cloud has a silver lining. Last year Mr. Bill Clinton, former-US president, commented to the effect that as IT had led the US economy in the past, measures against climate change and the introduction of new energies and clean technologies will become the main themes for economic development in the future. I would like to lay big hopes on the belief that green investments and sustainable investments will become the great tide of the times in the future.
Insurance is expected to play varied roles, covering both areas of measures for mitigation and those for adaptation. There is a likelihood of the occurrence of a huge natural disaster which the insurance industry cannot cope with by itself. We are faced with the need of considering seriously what we, citizens in society, should do for sustaining the insurance business. At the same time, I would very much like the insurance industry to express opinions loudly in society about desirable systems in the future.
(Panel discussion)
