Political declarations have sparked renewed momentum in the global drive towards carbon neutrality over the past month, and these moves will likely prompt an acceleration in the insurance industry’s efforts to cut its own emissions.
April saw several major political declarations to address climate change, most notably from the US, which has significantly shifted its strategy following the election of Joe Biden as president.
The US commitment to cut carbon emissions by 52 percent of 2005 levels by the end of 2030 was perhaps the most significant declaration, but several other political leaders unveiled even stronger targets, with the UK announcing plans to cut carbon dioxide emissions by 78 percent by 2035 when compared with 1990 levels.
Countries such as Japan, Canada, South Korea, China and Brazil also enhanced their previous commitments over the past month, with all setting revised targets either for the end of this decade or the middle of the next.
This shifting forward of commitments to nearer-term horizons such as 2030 or 2035 has increased pressure for similar moves among (re)insurers.
To date, most net-zero commitments from (re)insurers have used a 2050 horizon, but political pressure will likely intensify the need for greater commitment to near-term action, particularly as momentum builds in the run-up to this November’s COP26 conference in Glasgow.
Fiona Reynolds, CEO at the UN-backed Principles for Responsible Investment, suggests 2030 is the new horizon investors and corporates must aim for as action to reduce emissions is accelerated.
“What determines our success in tackling climate change will be our actions now and over the next five to 10 years, not a last-minute push before 2050,” she explained.
Some early movers within the (re)insurance sector have taken steps to introduce near-term targets, with Axa launching a new “Progress Index” to measure its performance in meeting its objectives.
The coming months will likely see several others review and enhance their existing commitments as political attitudes towards climate action gather momentum.
April saw the launch of the Net-Zero Insurance Alliance, a coalition of seven European (re)insurers which will serve as an umbrella organisation for the various net-zero coalitions launched by the sector.
At the initiative’s launch, Allianz CEO Oliver Bäte stressed the need for the (re)insurance sector to deliver on net-zero actions over the next decade. Bäte also emphasised the importance of common standards for ESG reporting.
For climate disclosures, international standards are increasingly converging around the Task Force on Climate-related Financial Disclosures framework, which in April was announced as the basis for new mandatory disclosures set to be introduced in New Zealand.
It is likely other countries will in time follow the path towards mandatory disclosures. As political noise builds in the run up to COP26, the insurance sector will have a critical role to play.
“Nothing really happens without our sector being behind the risk and helping to provide the investment,” Aviva CEO Amanda Blanc said following the launch of the Net-Zero Insurance Alliance.
“That gives us a big stake because the climate emergency threatens probably our business more than most. But it also gives us a pretty big stick, and with that comes a responsibility.”
The industry’s willingness to use that stick, and in turn take responsibility for its own actions, will determine how pivotal a role it plays in facilitating the economic transition that will need to take place over the coming years.