The insurance industry and wider financial sector ‘have the power and responsibility to drive progress’
As the intergovernmental G20 forum gathered in Venice for its Climate Summit on 9 and 10 July, eight of the world’s leading insurers and reinsurers have collaborated to establish the UN-convened Net Zero Insurance Alliance (NZIA).
Convened by UNEP Finance Initiative’s Principles for Sustainable Insurance (PSI), the NZIA has committed to transition its insurance and reinsurance underwriting portfolios to net zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5 degrees Celsius above pre-industrial levels by 2100.
The eight founding members of NZIA are AXA (NZIA chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re and Zurich Insurance Group.
Based on the NZIA statement of commitment launched yesterday (11 July 2021), each founding member will set independent, science-based intermediate targets every five years, while individually publicly reporting their progress on an annual basis.
This work will further build on the group’s 2025 decarbonisation targets, as all eight NZIA founding members are also part of the UN-convened Net Zero Asset Owner Alliance (NZAOA) – established in 2019.
Thomas Buberl, chief executive of AXA Group, said: “Insurers and reinsurers are already working towards decarbonising their investment portfolios in line with climate science and the Paris Agreement.
“With this new Net Zero Insurance Alliance, we are raising our climate ambition further by using our underwriting, claims and risk management practices to help ensure and enable the transition to a resilient net zero global economy.”
COP26 run up
Inger Andersen, executive director at the UN Environment Programme (UNEP), added: “For generations, the insurance industry has served as society’s early warning system and risk manager by understanding, reducing, pricing and carrying risk.
“As we approach COP26 in Glasgow, the risks posed by global heating are escalating and the world is a long way from meeting the promises made when the Paris Climate Agreement was forged nearly six years ago.
“Along with governments, the insurance industry and wider financial sector have the power and responsibility to drive progress towards a net zero economy and a sustainable future for all.
“I urge the rest of the global insurance industry to respond to the climate emergency and urgently follow the example set by the founding members of this pioneering alliance.”
In the run up to the 2021 United Nations Climate Change Conference (COP26) this November, the NZIA membership is expected to grow to include insurers, reinsurers, brokers and insurance market bodies from across the globe.
The NZIA statement of commitment is a comprehensive framework that considers scientific knowledge and the associated social impacts, as well as findings of reports such as those by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency’s (IEA) Net Zero by 2050 report.
It statement supports the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), considers emerging frameworks such as the Task Force on Nature-related Financial Disclosures (TNFD), supports the UN Sustainable Development Goals (SDGs) and the Post-2020 Global Biodiversity Framework. The NZIA has also signed the UN Principles for Sustainable Insurance (PSI).
Mark Carney, the UN special envoy on climate action and finance, the UK prime minister’s finance advisor for COP26 and chair of the Glasgow Financial Alliance for Net Zero, said: “Having a global financial system where every professional decision takes climate change into account requires harnessing the full role of the insurance industry as risk managers, insurers and investors for climate action.
“By committing to join the gold standard alliance for net zero, the Net Zero Insurance Alliance will ultimately make underwriting contingent on underlying companies having credible net zero transition strategies.”
The commitments by alliance members include:
- Setting underwriting criteria and guidelines for the most GHG-intensive activities within their underwriting portfolios.
- Engaging with clients and potential clients undertaking the most GHG-intensive activities on their decarbonisation strategies and net zero transition pathways.
- Developing and offering insurance and reinsurance solutions for low emission and zero emission technologies, as well as nature-based solutions that absorb GHG emissions.
- Improving claims management in an environmentally sustainable manner.
- Integrating net zero and decarbonisation-related risk criteria into risk management frameworks.
Amanda Blanc, group chief executive of Aviva, said: “Our whole economy depends on insurance, so a net zero insurance industry is a fundamental part of helping shift the economy towards protecting the planet.
“Aviva is proud to be a founding member of this alliance, as part of our own ambition [is] to be net zero by 2040 - it takes partnerships like these to tackle the big challenges facing us to build a sustainable future for everyone.”
Oliver Bäte, chief executive of Allianz SE, added: “As a founding member of this strong network, Allianz strives to accelerate the urgently needed transformation to a 1.5-degree economy.
“We are pleased to bring in our expertise and join forces to extend the net zero ambition to the entire insurance market.”
Moving forward, the NZIA is now preparing to join the UN Race to Zero campaign and officially become part of the Glasgow Financial Alliance for Net Zero (GFANZ), which is chaired by Carney.
All GFANZ initiatives, including the NZIA, must be accredited by the UN Race to Zero campaign and commit to transparent reporting and accounting in line with its criteria.