Francesca Romanin Jacur Milan University Francesca.romanin@unimi.it

1. The Involvement of Insurance Companies in Climate Finance:Tackling a Global Challenge by Investing in Local Solutions Francesca Romanin Jacur Milan University Francesca.romanin@unimi.it

2. Plan of the presentation • A Dynamic International Regulatory Framework • Climate finance • The Increasing Involvement of the Private Sector • Challenges and Opportunities for (Re-) Insurance Companies

3. Climate Change basic glossary • Mitigation: reducing GHG emissions • Adaptation: managing the effects of climate change, reducing vulnerability of human and natural systems • The target: the global scientific community (IPCC) calls for limiting global warming to 2o C above 1990 levels • Current pledges to reduce emissions meet ½ of the emissions needed • Towards a “low carbon economy”…

4. Climate Change Regime: the UN Framework Convention and the Kyoto Protocol UNFCCC (1992): Stabilization of greenhouse gases (GHG) concentration KP (1997) : by 2012: global GHG reduction target of -5%. • Shortcomings deriving from limited active participation (no USA, no commitments by emerging economies – China, India, BRIC) • Post 2012: … ongoing negotiations! • COP meetings and the crisis of multilateralism, but what’s the alternative? • Climate change regime financial pledges: (nonbinding political agreement) • 100 billion every year by 2020 (long term finance) • 30 billion of fast start finance in 2010-2012

5. Climate Change Regime Architecture SB for Implementation UNFCCC COP KP COP/MOP IPCC SB for Technical Advice Compliance Committee World Bank CDM JI Secretariat IET GEF 2% of levy on proceeds Adapt. Fund LDC Fund Grenn Climate Fund SCC Fund

6. Climate finance • Working Definition: The channeling of public resources (towards developing countries) (for mitigation & adaptation) through frameworks and mechanisms that leverage private sector capital, and are in line with national development goals. • Many sources: 50 international public funds, 6000 private equity funds, carbon markets, taxes, Clean Development Mechanism) • Challenges: • Catalyze new investment into climate mitigation and adaptation sectors • Develop new products with replication potential across markets and geographies

7. Combining Developing Countries and the Private Sector Needs • Gaining the trust of Developing Countries • … and of the Private Sector • Need of coordination among financial institutions (national, bilateral, international) • Trust in institutions and their procedures(Consistency of funding resources, transparency and inclusiveness, legitimacy) • The impact of the financial crisis • The need to conciliate different interests: • Effective mitigation and adaptation action and environmental integrity • Economic development and poverty reduction in Developing Countries • Economic gain for the Private Sector

8. Financing Adaptation • GOALS: • Generate new finance • Design and distribute goods and services that reduce vulnerability of individuals and communities to climate change • Provide risk management tools • TOOLS: • Drawing on capital markets to raise new finance for adaptation (climate bonds) • Direct credit lines to local finance institutions • Innovative means: microfinance

9. The role of insurance companies • Risk Reduction and Insurance • Catastrophe prevention, Risk assessment, emergency responses • Low rate of insurance penetration in developing countries • Technical assistance for setting up innovative financial products, programmes or services for the low carbon energy sectors

10. Climate Risk Management by the Insurance Sector • Public-private partnerships • With International Financial Institutions (World Bank) • At the country level • Index-based insurance solutions • Case studies • Challenges and opportunities of implementing climate insurance

11. Thank you! Dr. Francesca Romanin Jacur francesca.romanin@unimi.it