24 September 2014: During the UN Climate Summit, the UN Office for Disaster Risk Reduction (UNISDR), the World Economic Forum (WEF) and other partners, including Standard & Poor’s Ratings Services, Swiss Re, Willis Group Holdings and the UN Environmental Programme (UNEP), launched the ‘Integrating Risks into the Financial System: The 1-in-100 Initiative.’

The 1-in-100 Initiative will: stimulate and reward climate-resilient investments, as well as business models, strategies and plans that generate co-benefits; develop, test and apply incentives in the financial system; and strengthen support for the science and data required to analyze risk. The “stress test” aims to evaluate the maximum annual financial loss that a company, city or region might expect from extreme events and enables them to more effectively manage their risk.

Mike Wilkins, Managing Director, Standard & Poor’s Rating Services, said the initiative aims to help regulators, companies and investors evaluate the risk of storms, droughts, floods and other extreme weather events to the financial health of public and private sector organizations. He added that a better understanding of climate risk and economic losses from disasters should be a normal feature of investment analysis and financial planning.

Margareta Wahlström, UNISDR, underlined that integrating climate and disaster risk into economic decision making will help encourage investment decisions that reduce existing risks and avoid those that create new risks. Dominic Casserley, CEO, Willis Group Holdings, said applying a one in one hundred year solvency “stress test” to current assets and climate conditions can help organizations to “truly understand their risk and manage it in an economically rational way.” He added that the objective is to apply these principles within the global financial system by 2020.

More specifically, the initiative aims to: prepare and pilot the application of 1-in-100 year climate risk metrics across banking and securities regulation, and incorporate them into public and private accounting standards; collaborate with relevant regulatory authorities and stakeholders to ensure climate and disaster risk and resilience are incorporated into the financial system by 2020; establish a Resilience Modelling & Mapping Forum that will bring together leaders from the science, capital and policy arenas to coordinate research programmes and data collection, create and maintain common standards, and provide shared, open, modeling and mapping platforms; and coordinate at least US$100 million annual investment into public science research and open risk modeling facilities by 2016.

In addition, the initiative aims to link the global financial system with the post-2015 processes, such as those related to climate change, disaster risk reduction (DRR), the Sustainable Development Goals (SDGs) and a new development agenda. [UNISDR Press Release] [Resilience Action Statement on Integrating Risks into the Financial System: The 1-in-100 Initiative]