Incorporating climate risk into investing, finance, and insurance October 2019
Rade Muslin is a climate risk expert from the US who has worked with governments, businesses, and the farm industries to address the risks that come from extreme ecological events. He shares insights into how the global conversation is changing around how to deal with the impacts of climate change.
- What drove your interest in working around the climate change space?
I have spent most of my career working on extreme events, post-event recovery, and promoting societal resilience through things like stronger building codes. Climate risk is a natural extension of that work.
- How have things changed in the last 10 years around general public awareness and industry response to the risks associated with climate change?
The discussion has moved from academic institutions, multinational organisations, and government think tanks into the mainstream. There is widespread awareness of the problem and a growing commitment to addressing it. Unfortunately, it has taken some extreme events, like Hurricane Harvey in Texas or drought in parts of Australia, to bring the issues to the forefront of public discourse. The media has played an important role in educating the public.
- In what way does having a proactive approach to climate issues give businesses a competitive advantage?
Every major economic transformation creates both risks and opportunities for businesses (examples include the industrial revolution and the advent of the internet). Being proactive is critical, particularly given the speed at which changes occur today.
Decarbonisation will affect virtually every aspect of the economy, so ignoring the issue is not an option for most businesses. For example, consider what will happen to petrol stations if there is a shift to electric vehicles. Will they transition to offering charging services? If you are in the petrol station business you will need to anticipate how electric vehicles will be recharged, whether there will be a demand for retail charging stations (or will cars recharge at home or the car park), whether you need to move from quick convenience store sales to offering entertainment while vehicles recharge and so forth. By imagining an electric vehicle future such businesses can plan how, and when, to transition into new markets.
Those that plan well will have an advantage.
- What are the key differences you see between how Australia is addressing climate issues compared to your experiences in the US?
There are similar forces at work in both countries, including resistance to change by those who feel threatened by decarbonisation. The main difference is where each country is on the journey. In the US there is still a major debate about the science, with some public figures calling it a “hoax”. Australia has moved beyond that, towards discussing what action should be taken and how best to adapt.
- How do you keep objective when assessing situations when there is a human cost at stake. For example, making a recommendation that might cost jobs but be significantly more efficient and better for the environment broadly.
There are often painful costs with any massive economic transformation and we have to make sure we look out for those who are adversely affected. Overall, decarbonisation can be a major economic stimulus for the economy due to things like infrastructure investment.
The best way to overcome the human cost is to ensure that mechanisms are in place to retrain workers and help everyone move into the green economy. That is why it is important to Australia to be on the front foot on this issue, so we are the ones leading the change to a green economy instead of trying to catch up.
- As an American in Australia, what were some of your first observations about the differences between our two countries?
Aside from learning not to use “z” in words and developing a taste for vegemite, I would say mandatory voting and less special interest campaign contributions are important, particularly in the case of dealing with climate issues.
- How do you see the work you’re doing with Finity making a bigger difference in the climate conversation?
Finity is a well-respected firm which is a leader in natural perils analysis. We are well positioned to be trusted advisors to our clients on this important issue and be a part of the solution to climate risk management.
- What are some ways that businesses can start to make a climate transition?
A key step involves making climate risk assessment part of the firm’s overall enterprise risk management and strategic planning process. Firms need to understand how suppliers, customers, employees, and other stakeholders will be affected. Climate transition will be a long process and firms need to begin planning for it now.
- What is something most people wouldn’t expect about you?
I made a career transition in the 1990s from a traditional actuarial role into a public affairs officer (sometimes called a “lobbyist”) in the US, something I did until 2006. It was a valuable experience that made me appreciate the varied ways actuaries can use their skills in non-traditional ways.