At Liberty Mutual, we exist to help people embrace today and confidently pursue tomorrow. Our purpose was the reason behind founding the Liberty Mutual Climate Transition Center in 2022, to empower insurance professionals, customers, policymakers and decision-makers globally to adapt to and mitigate one of the biggest challenges of our time – climate change. The industry’s world-class capabilities of assessing risks and developing solutions to mitigate them will be critical to how the climate transition unfolds.
2023 was a big year for the Liberty Mutual Climate Transition Center with the release of its first proprietary research papers to advance the collective understanding of climate-related risks, impacts, and resilience. Subject matter experts also shared insights with financial service and insurance peers, customers, and policymakers to encourage cross-industry partnerships and dialogue. In the first year, we contributed to conversations around these big themes:
What Pragmatic Transition Planning Looks Like
At the heart of the Liberty Mutual Climate Transition Center’s mission is sharing research and data insights to help with more informed decision making around climate transition planning. By anticipating risk and navigating complexities, companies can conduct actionable transition planning grounded in the current realities of the global economy, while understanding the need to be flexible for future uncertainties. In 2023, the Center released two papers:
A case for a systems-level approach to pragmatic transition planning
The common approach to transition planning narrowly focuses on transitioning current operations and/or portfolios. However, there is a risk the company’s transition plans may fail as they do not adequately consider factors that are out of a company’s control but could have a significant impact on meeting the planned goals. This paper establishes the importance of a systems-level approach, which offers a pragmatic alternative to popular transition planning methods by identifying the external factors that are beyond a company’s control and pacing transition milestones with economic, technological and policy momentum. The paper recommends three macro inputs as a starting point for any transition planning process: the global climate policy landscape, energy demand in a net-zero world and energy supply in a net-zero world.
The big shift: Navigating the interconnected complexities of the energy transition
The concepts of climate change and energy transition are intertwined and any discussion on mitigating climate change quickly becomes a conversation about the need to transition the energy sector from a reliance on fossil fuels that are high carbon emitting to more renewable or low carbon emitting sources of energy. However, mitigating climate change requires much more than transitioning the energy sector. It is a once in a generation socio-economic transition event that requires system-level change, at a global scale, in a time frame that has never been attempted in the past. This paper highlights the climate transition pathways that companies can leverage into energy transition strategies.
Our subject matter experts were fortunate to speak on our research on climate transition risk and focus areas at several industry events throughout the year, including at the Intelligent Insurer’s Climate Risk and Sustainability in Re/insurance conference and MIT Climate & Sustainability Consortium (MCSC) annual member Symposium.
The Role of The Insurance Sector (and Financial Sector At Large) in the Climate Transition
We believe partnerships between the public and private sector can create a greater sense of dialogue and contribute to better cross-sector collaboration. Each branch of the financial service sector – banks, investments and insurance – plays an important and unique role in the energy transition and has opportunities to partner with the public sector.
This was the topic of focus for an all-day convening of representatives from the government, academia and the insurance and financial sectors, hosted by the Liberty Mutual Climate Transition Center and the Institute of International Finance (IIF) in June 2023. The public-private sector discussion also focused on macro risks facing climate transition planning, including holistic approach to climate transition, and risks around technology, policy & litigation. Listen to key remarks from the event “Planning for the Climate Transition: Understanding Macro Risks”:
- Sonja Gibbs, Managing Director and Head of Sustainable Finance, IIF
- Neeti Bhalla Johnson, President, Global Risk Solutions, Liberty Mutual Insurance
- Melissa Hoffer, Climate Chief, Office of Climate Innovation and Resilience, Massachusetts Governor’s Office
- Dr. Vanessa Chan, Chief Commercialization Officer, Director, Office of Technology Transitions, U.S. Department of Energy
- Maryam Golnaraghi, Director of Climate Change and Environment, Geneva Association
(And to explore the role that the financial sector plays in the energy transition in general, check out this episode of Liberty Mutual’s Partners for Progress series, featuring IIF.)
The Need to Advance Climate Data & Tools for Greater Resiliency
By leveraging climate modeling tools and other resources, the insurance sector uses data and science to track and understand weather-related events to help make well-informed decisions that benefit our customers, businesses and communities. However, there isn’t a one fit solution for the challenges facing us tomorrow.
The Climate Risk Data 101 video series hosted by Dr. Kelly Hereid, a Liberty Mutual climate scientist and the director of catastrophe R&D, highlights the challenges and the gaps facing climate risk data and how new solutions like combined climate data models can lead to better decision making, and ultimately more resilient building and infrastructures for communities.
More to Come
We’re already planning for more research and insights to be released in 2024. Make sure to check out the Climate Transition Center page for the latest updates throughout the year.