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Data is biggest challenge to climate risk, finds report

Climate changeA lack of data availability is the single biggest obstacle facing UK financial services firms in their effort to manage climate change risk, according to research from Willis Towers Watson (WTW).

A poll of 122 global firms, including asset managers and institutional investors, was conducted during WTW’s Climate Risk and Financial Stewardship Summit.

The vast majority (80%) cited data as their top concern in the transition to a net zero economy while difficulty in making quantitative assessments (75%) and insufficient expertise (62%) also featured highly.

Furthermore, many firms do not see climate risk diminishing in the years to come and 40% predict that the level of risk will escalate over time.  

“The scale of adaptation required over the period ahead and the amount of change that our customers are going to have to live with and in some cases fund  - whether they are individuals or businesses - is absolutely huge,” said Huw Evans, director general of the Association of British Insurers. “And we are just at the foothills of this challenge.”

A lack of consistency and availability around ESG-related data have been commonly cited by asset managers as critical issues.

This concern has also been intensified by the introduction of the EU’s Sustainable Finance Disclosure Regulation (SFDR), which calls on asset managers to provide more data on their sustainable funds.

Earlier this month, the European Fund and Asset Management Association, called for a transition period for the taxonomy elements of the legislation, citing a lack of reporting standards and the high cost of data.

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