CR Leaders: David Bresch, Swiss Re

david-bresch

AccountAbility Interviews Dr. David N Bresch, Director, Head Sustainability & Political Risk Management at Swiss Re Ltd

Since 2008, David Bresch has headed the Sustainability & Political Risk Management unit at Swiss Re. A central role of the unit is to guide Swiss Re’s commitment to provide ethical, environmentally and socially responsible financial services. As a global risk taker, climate issues feature prominently on the agenda at Swiss Re. David Bresch has been a member of the official Swiss delegation to the United Nations Framework Convention on Climate Change (UNFCCC) fifteenth Conference of the Parties in 2009 (COP15), COP16 (2010), COP17 (2011)and COP18 in Doha in 2012.

His previous roles since joining Swiss Re in 2000 include Head of University and Risk Research Relations and Head of Atmospheric Perils Group. He served as Swiss Re’s chief architect for natural catastrophe risk assessment models and has been member of the deal teams for many innovative risk transfer transactions, including catastrophe (cat) bonds and weather index solutions.

He serves as member of the adaptation board of the global network for climate solutions of the Earth Institute at Columbia University, as steering committee member of ProClim, and member of the Switzerland’s federal Advisory Body on Climate. Further, David is a member of the UN Environmental Program Finance Initiative’s Climate Change Advisory Group, a Global Agenda Council of the World Economic Forum, and board member of the World Wildlife Fund in Switzerland.

After receiving a Masters in physics from the Swiss Federal Institute of Technology, Zurich (ETH), David received his PhD at the Institute for Atmospheric and Climate Science at ETH in 1998 and spent a year at MIT in Cambridge, USA, as research associate in science and policy of climate change.

 

AccountAbility (AA): Swiss Re is often lauded for its efforts to integrate corporate responsibility (CR) (and specifically climate change) into its core business model in all regions you operate. In your view, what are the main success factors for this, and what sets Swiss Re apart from competitors?

David Bresch (DB): Three elements are important here:

First is company culture. As we’re a reinsurance company, we’re in business for the long-term. We need to have a view on serious complex matters for the planet as we diversify risks globally. We need to have a view on where CR impacts us; and where Swiss Re can make a difference. That’s why issues such as climate change have been on the company agenda for more than 20 years.

Second is our journey focusing on integrity. When we reshaped our code of conduct, we started from the values the company stands for, integrity being one of those. We use sustainability as a guiding principle in order to drive integrity and integral behavior across the organization. I believe integrity is even stronger than sustainability as a values statement.

Third is that we still need a ‘bad guy’. Which at Swiss Re is me (laughing). We need to remind people that it’s part of company culture, that it’s in Swiss Re’s DNA, and to remind colleagues that they have to live up to the code of conduct and integrity expectations of the organization – guided by the principle of sustainability.

AA: What has been the role of senior management in this process?

DB: Since I’ve been in charge of sustainability in Swiss Re, it hasn’t always been easy to work with the senior levels of the organization. On the Board-level we’ve always had one or two strong advocates for sustainability and integrity, while others remained skeptical. Today we have full understanding on the Executive Management level, but on the Managing Director (MD) level there’s still a lot of debate. Many new MD’s come from a pure business delivery angle and for some of them I do understand sustainability is perceived as a distraction and an annoyance. They must figure out how to build in the long-term perspective and still deliver on bottom line and growth targets quarterly, annually etc.

For our CEO, on the other hand, it’s been easy to convince him on the importance of sustainability. My role in Swiss Re is to support the MD’s, for example to reconcile and balance all their different expectations. Here I try to be as specific as possible. I explain that climate matters to Swiss Re, and Swiss Re underwrites its business on an annual basis – therefore, how can we factor climate risk into today’s business? Because if we don’t, we will end up in trouble in the future.

AA: Your main focus is climate change and adaptation; and how innovative insurance solutions can strengthen climate resilience and protect local communities. You share these challenges with many of your peers in the industry – how do you handle sustainability issues where you may have a shared responsibility with your peers, an opportunity for bigger impact through joint efforts and knowledge sharing, and an opportunity for competitive advantage?

DB: Most sustainability challenges are about reconciling short-term benefits with long-term implications. It’s about redesigning things in order to find a joint solution. In most of the sustainability spaces I believe that you’re well advised to share early because you need to forge alliances, you need to foster and strengthen shared understanding. If you don’t perceive risks the same way as your stakeholder do, how can talk about transactions with them? This is Swiss Re’s concept of emerging risk: We make sure we share our perception of risk, then we build a shared mental model of the implications, we are transparent on the assumptions and mechanisms we have in our models to ensure others understand our approach and numbers – for us to jointly build on.

Working with peers is sensitive. Some colleagues think we share too much and we should do more on our own. This is potentially valid for specific markets or types of risk where we have a competitive advantage for a few years on underwriting the risk and better and deeper knowledge than other companies. However, as soon as it comes back to sustainability issues and reconciling short and long term – it makes a lot of sense to share. Because if Swiss Re is not willing to share its concerns, how is a client able to talk about his or her concerns. It’s ultimately all about building trust.

AA: What are your biggest challenges in working and engaging with different stakeholders, including business, politics, academia, international organizations on broad CR topics? What would you advise other leaders in a similar situation?

DB: The biggest challenge for Swiss Re is to get from a shared understanding of the issue to a place where we really share risks in an economic fashion. That’s why we have a dedicated department within the company, called Global Partnerships. This unit bridges the gap between my pre-competitive shaping of a space together with partners and forges solutions together with clients.

Traditionally, you would have had an NGO requesting different partners around the table to resolve a particular issue. Interestingly, now you increasingly see a coalition of the willing in the business space and companies being progressively proactive. Large corporate players get together to solve issues often via platforms which convene organizations and enable alliances to come together such as the World Economic Forum and the Clinton Global Initiative. These platforms allow companies to take a step back and look at the world from a pre-competitive stage and say where we can play to our strengths and partner to make change happen and last in the long-run.

AA: Financial investors are among the most important stakeholders for companies; yet it is often a challenge for companies to appropriately integrate CR into their communication with investors. How do you work together with the relevant internal functions to educate investors on the importance of the topic of CR/climate change and how Swiss Re adapts to the challenges?

DB: Investor Relations (IR) used to sit in another building. About 2 years ago my desk moved and is now about seven desks apart from the head of IR. This completely changed the game.

At the same time, I also think the closeness to IR and investors has increased because we’ve reached a certain maturity with the CR topic. We talk now of risk, reputation and business opportunity. We have strong processes in place for each of these aspects. Investors are interested and concerned about investing in companies who will maintain positive reputations five years from now – and beyond.

What is coming next is the materiality discussion and investors wanting evidence about how we have made a difference in the CR space. We can do this in terms of detailing the areas of activity where we are not engaging because they do not live up to Swiss Re policy and standards. To spell this out in a positive sense is difficult. Environmental and social issues are often not at the core of the pure risk transfer, but transactions have – sometimes very significant – implications in these dimensions. Swiss Re doesn’t promote green products per se, but rather ensures that ESG elements are factored into all products and services.

AA: Looking at businesses more generally – what in your view would be an optimal organizational governance of the CR topic? Should there be a Chief Sustainability Officer (CSO)? And if a company has a CSO, who should they report to?

DB: For me this depends entirely on a company’s business model. Sustainability is about internalizing known externalities. Because you know that if you don’t factor in known issues yourself, somewhere in the future there will be a price tag on these externalities. If you’re not prepared for that then you’re in bad shape. The challenge is – if you’re too early in pricing externalities, you price yourself out of the market, and if you’re too late, you learn about the externality the hard way. In this sense the sustainability role needs to be close to those functions which are central to steering business direction – that means strategy, or functions that inform strategy and are close to operations.

I really believe there’s not one ideal department to house a sustainability team. At Swiss Re we sit in Risk, mainly because the Risk function is the one that has a second say on each business transaction before execution. This means we can exercise our mandate to protect the brand through our sustainability risk framework on a transaction level – where my unit has a veto right.

What would be the value of a CSO? For a re-insurer this would be a huge overlap with the Chief Risk Officer. So in this sense, it’s not the right move for the insurance industry. However, in sectors with complex supply chain issues it could be worthwhile having a CSO function and the risk officer would be part of the CSO role.

AA: Swiss Re is known for its research on the effects of climate change and the quantitative approach to arguing for investments today. How does your personal background in physics and as a researcher help you in your role?

DB: My legitimacy is really born from the fact that I was the chief natural catastrophe modeler within Swiss Re in the past. I think the fact that I know and understand the core business well, gives me a head start in internal discussions and brings credibility. The same is true for the external world. We at Swiss Re underpin our communications with a very rigid and detailed analytical context. At the same time though this makes me comfortable only dealing with issues where Swiss Re has something to say. For example, I think that biodiversity is a big global challenge, potentially more so than climate change, but in my professional role I can make a contribution to the climate change debate and I cannot do so to the same extent in the biodiversity issue. This does worry me as I feel with biodiversity we are losing options, losing species. But so much remains to be done to shape climate resilience of our society – hence we stay put on a topic where we can make a difference.