Swiss Re’s CEO answers our questions on how the reinsurer is addressing sustainability issues and outlines its key messages on climate ahead of this November’s planned COP26 meeting in Glasgow.

Christian Mumenthaler ESG

The ESG Insurer: You have described climate change as “the biggest challenge we face as a society”. When establishing your sustainability targets, how do you set the balance between commercial interests and your net-zero ambition?

Christian Mumenthaler: Climate change is not only the biggest challenge – it affects us all, too. At Swiss Re, we see first-hand how the effects of climate change manifest in natural catastrophes, especially when it comes to secondary perils, such as flash floods, droughts or wildfires. Last year alone, natural catastrophes caused global economic losses of $190bn, of which $81bn were insured. Swiss Re Institute estimates that in the future we may see insured losses rising up to $250bn-$300bn in peak-loss years because of population growth, wealth accumulation in disaster-prone areas as well as climate change. So, it’s not hard to see that our sustainability goals and commercial interests are aligned. We are focused on long-term value generation at Swiss Re, not short-term profits, and this sometimes means that we reduce our underwriting activities in a particular sector that we don’t consider sustainable, such as thermal coal, or that we stop investing in companies with poor ESG ratings. At the same time, we see ample opportunities to support our clients through risk-transfer solutions related to sustainability and have chosen an ESG investment approach which yields better risk-adjusted returns. Therefore, sustainability is embedded in everything we do, from our own operations, to underwriting and investing.

Do you see it as Swiss Re’s responsibility to encourage the transition towards a more sustainable future among its client base?

We do not need to encourage our clients to think about sustainability – it is already very high on their agenda. Shareholders are putting pressure on all companies to adopt more sustainable practices; regulators are asking for more disclosure; employees, especially the younger generation, also expect real progress towards a more sustainable future. Therefore, our dialogue with clients about sustainability topics is very active. For example, in 2020 alone, we held more than 400 conversations with our reinsurance clients as we developed an exit strategy for thermal coal in our treaty business. We are also moving away from providing insurance coverage to the most carbon-intensive oil and gas producers. At the same time, to encourage the transition towards renewable energy, we are providing risk cover to more than 5,600 wind and solar farms. To achieve our business and net-zero goals, we build and scale on successful partnerships with clients working on this transition.


Swiss Re has said it will engage in “an active dialogue” with firms within its equity portfolio to encourage them to align operations with the 1.5°C pledge outlined by the Paris Agreement for the business sector. How will this work in practice?

We aim to encourage companies to develop a climate strategy and formally define how they can manage related risks, ultimately preparing them for the transition to a 1.5°C economy. This is a key part of the Race to Zero because focusing only on divestments of high emitters from the investment portfolio is not enough. We work closely with our external equity managers to reach out to companies in our portfolio and have set targets regarding engagement frequency and desired outcomes. These allow us to monitor progress in a structured way. Since we started with this approach last year, our investment managers have already begun engaging with close to half of the companies within our listed equities portfolio. And many of these discussions have been quite encouraging.  

As an industry, where do you think the (re)insurance industry should be doing more to address climate issues?

As for any industry, progress towards net-zero goals gets exponentially harder the further one goes. At the beginning, companies tend to focus on their own operations and their energy suppliers – things that are easier to control. But to reach net zero by 2050, we all need to start thinking in much broader terms and looking at entire value chains. This means also looking at our underwriting and investing activities. Many companies are already starting to address these areas, but we clearly have a long way to go still. In this respect, alliances, such as the UN-Convened Net-Zero Asset Owner Alliance, of which Swiss Re is a founding member, or the World Economic Forum Alliance of CEO Climate Leaders, which I have the privilege of co-chairing, are very useful platforms for sharing experiences with other like-minded companies and leaders. Climate change is a global problem that needs a global solutions-oriented approach.

“To further emphasise its importance, as of 2020 we defined sustainability as a distinct qualitative performance assessment dimension.”

Having built sustainability into your governance framework, you have committed to link sustainability performance with remuneration. What are some of the challenges in doing this? How do you see this practice evolving as the group progresses towards its net-zero ambition?

Because we see sustainability as a value driver, it was a logical step for us to link sustainability performance to remuneration. We do this by embedding sustainability-related targets into the assessment process we use to set our annual bonus pool. As such, it impacts compensation for all employees, including our senior management. Implicitly, sustainability has always been part of the qualitative performance assessment we make to set the bonus pool. To further emphasise its importance, as of 2020 we defined sustainability as a distinct qualitative performance assessment dimension. Setting targets that are measurable across all parts of our company is one of the challenges we face. We are continuously working to refine our approach, and while the 2020 targets were primarily qualitative in nature, we will move to increasingly quantitative targets starting in 2021.

What will be your key message for the UNFCCC COP26 meeting in Glasgow this November?

I am an optimist, and I believe that achieving net zero by 2050 is a mission possible, but we need to speed up and scale up climate solutions across all value chains. This will require an enormous amount of cooperation and joint problem-solving across industries to drastically reduce emissions. However, we will not achieve net zero without scalable solutions to remove carbon dioxide from the atmosphere. This sector is still in its nascent stage, and we all have the duty to support innovation and progress in this regard.

“I am an optimist, and I believe that achieving net zero by 2050 is a mission possible, but we need to speed up and scale up climate solutions across all value chains.”

Of the sustainability and ESG initiatives adopted by Swiss Re during your time as CEO, which do you see as the most significant achievement? And which initiative do you think has provided the most societal good?

I think of our sustainability initiatives as a journey. The first publication in which Swiss Re warned about the detrimental effects of climate change was published in 1979. But it wasn’t until some 20 years later that we published our first Corporate Environmental Report. In recent years, our action plan has accelerated considerably. Since signing the Paris Pledge for Action in 2015, we were one of the first companies in the industry to switch to ESG benchmarks in asset management, started phasing out (re)insurance coverage for thermal coal and most severe carbon risks in the oil and gas sector, introduced an internal carbon levy at $100 per tonne of CO2, set targets to cut emissions from air travel and committed to reduce carbon intensity of our investment portfolio by 35 percent by 2025 compared with 2018. These are just a few examples that show we are serious about this journey, but I’ll let the future generations judge which measures were the most impactful.