KPMG Insights: The Insurance Implications of COP30

 COP30 in Belém was described as the “implementation COP,” marking a shift from broad commitments to tangible progress on climate goals. Simon Weaver, Global Head of ESG Advisory at KPMG, shares his insights on what this means for business and finance—from the growing emphasis on adaptation and nature, to the expanding remit of the Chief Sustainability Officer, and the increasing influence of insurance, climate risk, and carbon markets on corporate valuations.

Simon also highlights why measuring the cost of inaction, unlocking private capital, and leveraging AI will be essential as global leaders move toward Davos and face deepening adaptation and nature challenges.

What did COP30 focus on? How did it compare to COP29?

COP 30 was termed the “implementation COP” – with the presidency recognising the need to move from discussion to action. It is one thing having NDCs – but we now need actionable plans that will deliver on this, with clarity on the innovations, policies and investments needed to achieve the commitments set out in the NDCs. Without this it is very hard for the various stakeholders (companies, citizens etc) to know how they fit in, noting that companies and citizens clearly can influence policy too 

Compared to COP 29 in Baku, there was significantly more discussion in Belem around both Adaptation and Nature – two issues that are inherently linked. The evidence is clear that climate adaptation investment yields significant returns. The World Resources Institute has just published its own research that reveals that every US$1 spent on adaptation and resilience returns around US$10. Despite the clear business case, spend in these two areas remains woefully low. 

That said, there are some strong recent examples where investment is happening. In one conversation I had at COP30, a senior executive in the insurance sector talked about $30bn spent in recent years to make Shanghai more resilient to climate change. That level of investment demonstrates that they obviously created the financial business case. 

The good news is that restoring/ regenerating nature is one of the easiest ways to suck up carbon emissions so it is a double bubble effect. Crucially, there is the ever increasing recognition of the role of the carbon markets to drive the global energy transition. There will always be imperfections in the markets, like any market, but we must not let perfection get in the way of progress

How has the role of the Chief Sustainability Officer changed in the past year, and how was that evident at COP30?

Over the last few years, for many CSOs the focus has been on compliance reporting. As the baseline reporting (whether that is ISSB or CSRD) becomes more part of business-as-usual, the focus has now rightly swung to how to embed sustainability considerations in to business planning and strategic decision making. 

The key question for most CSOs now is what is the financial business case for the sustainable actions needed to deliver on our targets and ultimately our ambitions? This is why CSOs need to be closer to finance, closer to the business, and closer to investors than ever before. 

I’ve recently spoken extensively about whether the CSO role is disappearing. My view is that it absolutely still exists, and it will always need to exist in different forms depending on the sector. In every company I work with there is still someone focussed on identifying how to ensure that sustainability considerations are embedded in to the company’s strategic direction

This question requires a different skillset to compliance reporting so in some cases the individual has to change, but the role is still crucial to a companies success. One fellow executive put it very well when they said: “The end of the CMO role was discussed 20 years ago…yes everyone has had to get better at marketing but that doesn’t mean you don’t need a CMO.”

It was those strategic CSOs who were there in Belem, challenging the status quo and discussing topics such as how do we ensure that an excessive focus on pragmatism doesn’t lead to a unambitious progress in the coming years.

The past year has seen a lot of regulatory fluctuations - what are the implications of this for global climate action and corporate sustainability practices and how did it impact conversations at COP30?

I’m a firm believer that we can get too easily distracted by the regulatory reporting fluctuations – especially the back and forth in EU. As I have said for the last five years, the disclosures should be the outputs, not the driver, of sustainability actions across a business. This is one of the mistakes that we as a sustainability profession have made in the last few years – letting the reporting disclosures dominate the sustainability conversations in Board around the world.

Interestingly as a result, I heard a lot less reference of ISSB and CSRD in Belem – not because they aren’t important but because they are just part of the baseline for many companies now, especially those in attendance at COP. As I say to all my clients – focus on those sustainability issues that are (financially) material to you – and that will put you in a strong position to embed sustainability issues in to your strategy, driving both value and impact, and the outputs of this will form the basis of any disclosures required  

On the issue of wider regulations, the current politicisation of climate in many countries has led to a turn down in the volume around climate policies – albeit many policies still exist and new ones are still being issued. They just don’t make quite as exciting headlines as those being pulled back so we don’t hear about it so much. 

Drawing on recent progress since the Paris Agreement, what lessons can we learn from areas where science has spurred successful action and how can these inform efforts on other planetary boundaries?

The UK’s Special Representative on Climate Change, Rachel Kyte, talked at COP30, about the importance of recognising the progress we have made since Paris. That is, we’re heading towards 2.7 degrees warming by the end of the century vs 4 degrees 10 years ago, whilst also recognising how far we have to go. 

I was lucky enough to attend a couple of sessions where leading climate scientist Johan Rockstrom was speaking. He talked about the fact that we have now breached 7 of the 9 planetary boundaries, but we still have time for action before we reach the tipping points that will be some hard to recover from. Johan noted the 2 planetary boundaries we haven’t breached are aerosol loading (air pollution) and stratosphere o-zone layer. His view, which I share, is that the world listened to the science on these two challenges. We now must do the same on the other 7.

I believe COP30 is a great example of how storytelling is so important. As humans we naturally lean out of threats so we need to frame returning back over these boundaries as a challenge rather than a threat. Threats are what make headlines, but we need to come together as society and work out how we can win this challenge – in a way that drives growth in prosperity in all ways.

How can companies and governments improve their ability to quantify the cost of inaction on climate change at both national and organisational levels?

In a COP30 session I joined with Brazilian Ambassador Tatiana Rosito she noted that not being able to quantify the cost of inaction, at a company and country level, was the biggest challenge of COP30. I couldn’t agree more – and I think being able to work this out better will be a hugely positive tipping point for our progress in the challenge against the planetary boundaries. At KPMG International, we’re working with the WBCSD and across the profession to try and solve this. Ultimately, this is where the accountants and finance community need to step up and do our bit. 

How is climate change impacting company valuations and financial stability, and how can that be incorporated into decision-making?

There is clear evidence that it is already impacting valuations. In regions like California and whole countries including Australia, we’re seeing a direct link between the growth threat of climate change and valuations of property and insurance premiums. In the US, fairly conservative estimates predict that future wildfires will cost the country at least $400 billion every year. Norges Bank is a great example of one financial institution that regards climate risk as a clear financial risk to its investment portfolio. The bank, as a matter of course, constantly interrogates climate change scenario planning and climate impact in its investment planning and it’s doing it for prudent, practical reasons rather than being driven by any moral obligations. In short, as one executive of a Fortune 50 company put it: “nature is a multi-trillion-dollar subsidy to humanity which we haven’t yet worked out how to value”. However, as a finance profession, we are still working out how to bring this down to the company level. These are the kind of issues we at KPMG International are working on with WBCSD and across the profession, but we have some way to go before the financial risks and opportunities related to climate change are wholly reflected in company valuations and we will need to challenge the status quo, working cross-sector and cross-profession to better reflect the cost of inaction in to strategic decision making at a country and company level.

Another emerging theme for me at COP30 was the role of insurance in tackling the challenge of climate change, both how we better utilise the forward risk data and related expertise they have at their fingertips and how we use their investment book to finance both adaptation and mitigation programs (which will reduce the insurance losses of the future). One Chinese executive said to me that “insurance used to be the cornerstone of financial stability but we are starting to see it crack.” It’s a pretty sobering observation and, as I’ve already said, it's evident right now if you look at challenges like uninsurable homes in California. Insurance is there to spread risks across communities, but the risk is getting too high and concentrated due to climate change. Another insurance executive I chatted to, said “the challenge is that to create an effective market we need scale…insurance needs to be part of the NDC investment plans”. The insurance sector will have a key role to play in the valuations challenge. 

As we move towards major global forums like Davos, what are your key takeaways from COP30?

We do still have time but we need to collaborate more. In my view there are too many organisations working on similar challenges and we need to be consolidating these to take the noise and complexity out of the system and go back to the basics of why this is so important. As business leaders, working together, we should be challenging ourselves with some of the basic questions like - What does the science say and what does this mean financially at a country and company level? How we can mitigate these risks and maximise the opportunities? What do we need to do to drive these actions forward today? And finally, how do we mobilise the finance, organisations’ workforces and society as a whole behind this? 

Speaking at COP30, one Japanese Bank CSO put it perfectly saying: “the people in this room know what we need to do, the challenge is how to mobilise the 160,000 people across my organisation to respond to the challenge.” 

Speed and scale is key and that is what the private sector are good at. We won’t solve it all, but we can make significant progress in the current financial and geopolitical structures we need to operate within. It is now incumbent on those who had the privilege to listen, learn and collaborate in Belem to tell the honest narrative – the challenge we face and the solutions we have to respond to them, and the financial business case (at a company and country level) to deliver on this.

For me, the AI challenge is the exciting issue of the moment, and AI can play a huge part in the solution against climate change, but if we get the response to climate change right we will redefine the pathway for our global society, in the way that AI will do so too – we must not forget that. 

Sustainability is often held to a higher standard than other areas. For example, we’re often expected to be able to forecast more accurately than general business predictions, but we must not let perfection get in the way of progress. As we look towards Davos, we need to be bold, brave and not lean out. We need to close the emissions gap, close the adaptation gap and restore nature…and we all have our part to play.

Speaking at COP30, one Japanese Bank CSO put it perfectly saying: “the people in this room know what we need to do, the challenge is how to mobilise the 160,000 people across my organisation to respond to the challenge.” 

Speed and scale is key and that is what the private sector are good at. We won’t solve it all, but we can make significant progress in the current financial and geopolitical structures we need to operate within. It is now incumbent on those who had the privilege to listen, learn and collaborate in Belem to tell the honest narrative – the challenge we face and the solutions we have to respond to them, and the financial business case (at a company and country level) to deliver on this.

For me, the AI challenge is the exciting issue of the moment, and AI can play a huge part in the solution against climate change, but if we get the response to climate change right we will redefine the pathway for our global society, in the way that AI will do so too – we must not forget that. 

Sustainability is often held to a higher standard than other areas. For example, we’re often expected to be able to forecast more accurately than general business predictions, but we must not let perfection get in the way of progress. As we look towards Davos, we need to be bold, brave and not lean out. We need to close the emissions gap, close the adaptation gap and restore nature…and we all have our part to play.