Climate Change Adaptation - Co-operators Case Study
A new strategic initiative, sponsored by Chartered Professional Accountants of Canada and Natural Resources Canada, aims to help companies identify both risks and opportunities and adapt to the effects of climate change. In the first of a series of case studies, KKS helped CPA Canada to shed light on how climate change affects businesses and why accountants have an important role to play.
The Co-operators Group Ltd. is a Canadian-owned and -operated company with more than $35 billion in assets under administration and two million people insured across the country. The company wanted to create insurance products for their clients directly related to damages caused by extreme weather events at a price point that would be affordable while preserving the organization's financial strength. The need for such products became more pressing after the Alberta events, especially given Canada's status as the only G7 country that does not provide overland homeowner's flood insurance products.
The company developed their climate change adaptation strategy, supported by strong commitment to sustainability from the CEO and the Board's Sustainability and Citizenship Committee. Accountants had a substantial contribution to Co-operators climate change adaptation strategy. They were involved in identifying and quantifying risk for the new insurance product, developing an approach to pricing, estimating return on equity (ROE) and return on investment (ROI), and supporting the business case for the new product.
Still, there are challenges to the accounting profession in the context of climate change: in the future accountants will be required to have a much broader range of skills and expertise so as to be better able to account for climate change-related risks and opportunities. Some insights from Co-operators include the ability of accountants to provide context to quantitative analysis, understand environmental, social and governance (ESG) issues, manage new data and informational resources, support the adoption of natural capital accounting and conduct stress testing and scenario analysis around climate change risks.