Investment innovation of the year
Insurance Asset Risk Awards 2020 - UK & Europe

All top five risks in terms of likelihood listed in the 2020 World Economic Forum Global Risks Report were climate related, this is the first time in the report's 15-year history that all the top risks are exclusively environmental.

This is indicative of the shift with climate risk taking centre stage in the investment community, when it once was a topic on the margins. With such prominence it is not surprising that the judges chose to reward an innovation designed to help insurers and investors consider the impact of climate risks on their portfolios.

Wellington Management entered in a research partnership with Woods Hole Research Center, a climate think tank.

Through this alliance, Wellington has rooted the modelling of physical impacts from climate change into the fabric of its investment research platform, allowing the integration of climate risk within portfolio management, strategic asset allocation and enterprise management for its global insurance clients.

Tim Antonelli, insurance portfolio strategist at Wellington, said: "Working with climate scientists, we are studying the implications of climate factors, and then creating maps showing the impact to geographic areas over time. We then overlay these maps with various capital market data to assess whether these outcomes are appropriately priced."

Over the past year Wellington designed a global model of six physical climate risk variables by decade: heat, drought, water access, flooding, hurricanes, and wildfire. Ultimately creating an investor tool that could link asset exposures with climate variables and index the investments for total climate risk across the aforementioned dangers.

Judges commended Wellington for its initiative and said they expected other asset managers to follow suit on it.