Bank of England, IDF Event

SPEECH Bank of England, IDF Event, 13 February 2019

Ms. Mami Mizutori

1. Ladies and gentlemen, good morning. Thank you for the opportunity to say a few words about the role that the investment sector can play in promoting sustainable economic development and resilient communities.
2. Building resilience to disasters is a topic which is at the top of the political agenda in many parts of the world where the struggle to manage disaster risk has become a daily cause of concern.
3. In March 2015, UN Member States adopted a global plan to reduce disaster losses known as the Sendai Framework for Disaster Risk Reduction. Reducing those losses is key to eradicating poverty, action on climate change and achieving the other Sustainable Development Goals.
4. The three years since the adoption of the Sendai Framework have been among the costliest years on record for the insurance industry, way above the 30-year average of $41 billion with a record $138 billion of insured losses in 2017.
5. Unfortunately, those numbers are only a small part of the story. Every year it’s nearly always the case that recorded economic losses exceed insured losses by as much as 60%.
6. We also know that there is no reliable economic loss data recorded against 63% of major disasters recorded over the last twenty years. In addition, what is reported does not include extensive, slow onset disasters or indirect losses.
7. The World Bank has calculated that the true impact of disasters on the global economy is about $520 billion annually and these events push 24 million people into poverty every year.
8. So what can the investment community contribute to ameliorate the situation?
9. Firstly, in most economies, the private sector is responsible for 70% to 85 % of all infrastructure investment. Full disclosure of disaster risks on the balance sheet is central to understanding just how risk-informed investment decisions really are. This will not only ensure long-term viability but also prevent rating downgrades, litigation risks or bankruptcy.
10. Secondly, research shows us that every dollar invested in reducing the risk of a disaster leads to savings from $4 to $105, depending on the scenario. We need to promote resilience as a comparative long-term advantage with Governments, and the financial and private sectors.
11. Thirdly, we must work together to prepare for the economy of tomorrow. Industry, Ministries of Finance, regulators, donors and other policy makers must collaborate to develop comprehensive, long-term risk financing strategies, regulatory frameworks and standards for resilience.
12. The good news is we are seeing new initiatives taking up the resilience challenge, often triggered by far-sighted individuals such as yourself, Dr Carney.
13. One such initiative is the Task Force on Climate-Related Financial Disclosures designed to increase the amount of reliable information to investors and insurers and facilitate the transition to a more stable and sustainable economy.
14. Even more concretely, work ongoing under the EU Capital Market Union Action Plan is about to change regulatory frameworks across Europe towards sustainable financing.
15. It is critical to integrate a resilience taxonomy into these discussions, thereby covering the full spectrum of risk beyond the current focus on transition risks and climate change mitigation.
16. This is needed to accurately reflect the interconnected risk landscape, where systemic risks are becoming the likely scenario for the future.
17. This discussion here today is a clear sign that the investment tide may be turning in favour of resilience.

Thank you for your attention.