Managing and financing extreme weather risks will move steadily up the corporate agenda as the frequency of events increases, a report from the World Energy Council (WEC) co-authored by Swiss Re Corporate Solutions predicts.
The report, entitled ‘The road to resilience – managing and financing extreme weather risk’, was presented at the meeting of G20 energy ministers in Istanbul, Turkey.
It is the first in a series that address the need for more investment and system change to combat the new emerging risks, including extreme weather, the energy water food nexus and cyber risks.
Swiss Re CS outlines the following key findings from the report:
- The number of extreme weather events increased more than four times over three decades, from only 38 events in 1980 to 174 in 2014. Not all energy infrastructure is prepared for extreme weather, making power supply disruptions in the future more likely.
- Protecting energy infrastructure assets against extreme weather will significantly add to the already existing investment need of US$48 – $53 trillion globally by 2035.
- The energy industry needs to move from fail-safe to a safe-fail approach by adopting smarter, not stronger, solutions for resilience.
- Energy systems must be viewed more systemically – an event in one area can cause a chain reaction and cause unforeseen problems in other areas. Focusing on what the system as a whole needs can help to better prepare and help to recover critical assets.
- The costs of resilience is not included, nor counted as beneficial, in the financing of infrastructure. Uniquely tailored financial instrumentation can turn system vulnerabilities into investment opportunities.