Financial industry must act now to mitigate future climate losses

Njeri Njomo, CEO of Jubilee Health Insurance. [Courtesy]

The global financial services industry is facing climate-driven losses of up to Sh232.5 trillion ($1.8 trillion) by 2050.

This huge amount will shake the industry and wipe out companies that will be found unprepared.  But as the threat looms, only 25 per cent of financial services firms globally have set measurable Environmental, Social, and Governance (ESG) targets.

Instead, players in the competitive industry are still focused on metrics that define success—Return on Equity (ROE), Return on Investment (ROI), EBITDA (Earnings before interest, taxes, depreciation, and amortisation) and embedded value.

These terms shape our strategies and measure achievements. Yet, as we focus on these traditional profitability indicators, we must confront a new reality - the escalating financial risks posed by climate change.

Recent research from the Network for Greening the Financial System (NGFS) and Swiss Re Institute projects that the global financial services industry could face climate-related losses of up to $1.8 trillion (Sh232.5 trillion) by 2050. 

These losses are no longer distant since the effects are already upon us. Unseasonable weather patterns, unexpected heavy rains, and severe droughts are no longer rare occurrences—they are the new normal.

These climate disruptions are not just environmental anomalies; they are financial realities, leading to increased insurance claims, damaged properties, and heightened risk of loan defaults.

As leaders in the financial sector, we must ask ourselves whether we are prepared to operationalise sustainability in a way that redefines success. It’s no longer enough to pursue profit alone; we must aim for Profit Plus—profit with a purpose.

Profit Plus embodies the idea that profitability must now go hand in hand with sustainability, creating value not just for our shareholders but for society and the environment.

The frequency of climate-related disasters is driving up the cost of insurance and increasing the risk of loan defaults, making it harder for many to afford the protection they need.

If we fail to integrate these risks into our core strategies, we risk more than just our profits. We risk the stability of the very communities we serve and our relevance in the future. This is why integrating ESG principles is not just a smart move—it is essential for our shared future.

While many of us understand the importance of ESG, the real challenge lies in moving from understanding to action. How do we transform this knowledge into strategies that not only protect the planet but also enhance our businesses?

Too often, ESG initiatives are viewed as costs or obligations rather than opportunities to build stronger, more resilient companies.

Without setting targets, we miss out on opportunities to strengthen our operations and meet the growing demand for responsible business practices.

To truly benefit from ESG, we need to set clear, actionable goals—whether it’s reducing operational costs through energy efficiency, entering new markets with sustainable products, or enhancing governance to build trust with customers and investors

Operationalising ESG is not about ticking boxes; it’s about embedding these values into every decision we make, ensuring our businesses remain profitable, resilient, and relevant in a rapidly changing world.

For example, banks that finance sustainable projects are tapping into new markets by offering green loans for initiatives like solar energy, water conservation, and sustainable agriculture, which is known as green lending.

This isn’t just about environmental stewardship; it’s about driving growth in areas that will only become more critical as regulations tighten and consumer preferences shift.

Weather patterns

In the insurance industry, climate-resilient agricultural insurance is helping farmers adapt to unpredictable weather patterns.

This is not just risk management—it’s about offering solutions that meet real market needs, fostering loyalty, and opening up new revenue streams.

Also, there is a need to expand financial inclusion through microinsurance.

These microinsurance products designed for low-income populations, offered through mobile platforms, are not just corporate responsibility; they are smart business.

By reaching underserved markets, we expand our customer base and build trust in communities that are often overlooked. These examples demonstrate that when we integrate ESG into our operations, we are not just complying with regulations but positioning our businesses to thrive in the long run.

This is how we remain relevant, resilient, and profitable in a changing world.

As we reflect on these insights, I encourage leaders to ask themselves: Are our ESG initiatives aligned with financial goals, and are they truly influencing our product development, risk management, and customer engagement? Are we investing in the right areas to overcome barriers and create value under the profit-plus framework?

The time for talk is over. The decisions we make now will determine not just our profitability but our legacy and sustainability. Let’s not just be part of this change—let’s lead it.

Together, we can build a future where sustainability and profitability go hand in hand, creating a legacy we can all be proud of.

-The writer is the CEO of Jubilee Health Insurance