Now, the International Association of Insurance Supervisors (IAIS) is reviewing the data sources and gaps and considering the risk case for a differentiated capital treatment for infrastructure under the global Insurance Capital Standard – ICS 2.0. We also need to develop the conditions to make infrastructure assets more readily investable and more easily tradable. Under the Argentine G20 presidency last year, with support from the World Bank and OECD, the G20 designed a roadmap to make infrastructure a more coherent asset class. The foundation is greater standardisation through greater commonality in terms, conditions and financial frameworks. This allows the assets to become easier to invest in, easier to insure, and project risks to be better managed. Data on the input and impact of infrastructure projects can also be improved. For instance, data on project phases would allow comparisons across construction phases of infrastructure versus non-infrastructure assets. Information on the types of concessions and licenses offered in different regions are important as they determine the kinds of revenue arrangements for infrastructure projects, which ultimately influence cash flow stability – critical information for investors. The IAIS is developing a workplan to examine these data gaps in the coming year. Reporting, risk management and return Turning to mainstream investing. Changes in climate policies, technologies and physical risks in the transition to a net zero world will prompt reassessments of the value of virtually every asset. The financial system will reward companies that adjust and punish those who don’t.

Over the next two years, the current process of disclosure by the users of capital, reaction by the suppliers of capital, and adjustment of these standards will be critical to ensure that the TCFD standards are as comparable, efficient and as decision-useful as possible. Risk management With better information, the frontier will be to upgrade risk management and optimise returns. As the supervisor of the world’s fourth largest insurance industry, the Bank of England knows that general insurers and reinsurers are on the front line of managing the physical risks from climate change. Insurers have responded by developing their modelling and forecasting capabilities, improving exposure management, and adapting coverage and pricing. In the process, insurers have learned that yesterday’s tail risk is closer to today’s central scenario. And leading insurers also understand that the breadth, magnitude, and foreseeable nature of climate risks— mean the biggest challenge will be to assess the resilience of firms’ strategies to transition risks. That’s why, the Bank of England just set out our supervisory expectations for banks and insurers regarding their governance, risk management, strategic resilience and disclosure of climate-related financial risks. 8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  And in June the Bank announced that we will be the first supervisor to stress test our financial system for resilience against different climate transition pathways: ranging from early and orderly to late and disruptive.