Swiss Re to walk away from thermal coal risks

Reinsurer Swiss Re is to end the cover for thermal coal risks by the end of the decade in sweeping new changes to drive its net zero efforts.

The underwriter revealed a series of steps towards how it will move to net zero including:

  • 2025 carbon intensity reduction target of 35%1 for corporate bond and listed equity portfolio; direct real estate portfolio already ahead of 1.5°C pathway by 2025.
  • Long-term objective to exit coal-based assets for the portfolio by 2030.
  • Swiss Re will systematically engage with portfolio companies on developing climate strategies as part of a broader engagement framework.
  • Target to increase investments in renewable and social infrastructure by USD 750 million. In addition, target to expand green, social and sustainability bond exposure to USD 4 billion by the end of 2024 (from USD 2.6 billion at end of 2020).

As part of its efforts Swiss Re will report on progress towards the targets on an annual basis.

“The ambitious targets build on the already substantial decrease of the carbon intensities in Swiss Re’s corporate bond and listed equity portfolio of around 30% between 2015 and 2018,” it said in a statement.

Swiss Re’s Group Chief Executive Officer Christian Mumenthaler (above) said: “Climate change remains the biggest challenge we face as a society. The stakes are high and require immediate attention. Signing up to net-zero emissions by 2050 and setting concrete climate targets are important first steps. What needs to follow now is action. We are moving ahead in all areas of our business to accelerate the transition towards net zero.”

On the withdrawal for thermal coal business Swiss Re explained it was a core part of their efforts to accelerate its move to net-zero in insurance underwriting.

Under the scheme in 2023 Swiss Re will tighten its coal policy by introducing new thermal coal exposure thresholds for treaty re/insurance across its property, engineering, casualty, credit & surety and marine cargo lines of business. The thresholds will be lowered gradually and will lead to a complete phase out of thermal coal exposure in OECD countries by 2030 and in the rest of the world by 2040.

“The thermal coal policy was established in 2018. It marked a first step towards a comprehensive carbon steering mechanism with the goal to transition Swiss Re’s re/insurance business to net-zero emissions by 2050,” it added.

The coal policy is part of the Group’s Sustainable Business Risk Framework which was established already in 2009. In 2020, Swiss Re revised the oil and gas policy in the same framework and in the beginning of 2021 gradually started withdrawing insurance support from the most carbon-intensive oil and gas production.

The news has been welcomed by climate groups but some say that the firm should increase the speed of their transition.

Lindsay Keenan, European Coordinator, Insure Our Future said: “We welcome Swiss Re’s commitment to a full phase out of thermal coal from its treaty reinsurance and call on all other reinsurance companies to do the same. Treaty business is a very large portion of the reinsurance trade and it has been a major loophole in coal underwriting that needs to be addressed. Swiss Re has set a benchmark that the rest of the industry needs to follow, now.”

Insure Our Future said it wrote in early March to ten of the world’s largest reinsurance companies urging them to take action to exclude coal from their treaty business.

Mr Keenan added: “Now that Swiss Re has responded with an ambitious and clear commitment, we call on Munich Re, Hannover Re, SCOR, Berkshire Hathaway, Lloyd’s of London, MAPFRE and Vienna Insurance Group to quickly follow suit.”

Angelina Dobler, Climate Campaigner, Campax said: “As Swiss Re finalises the details of its approach to treaties, they need to exclude treaty cover for any companies developing new coal projects immediately. Swiss Re also needs to align its reinsurance business with the need to phase out oil and gas production to limit global warming to 1.5°C, starting with an immediate end to covering new oil and gas expansion projects.”

Swiss Re said the new targets have been defined in accordance with science and the Net-Zero Asset Owner Alliance Target Setting Protocol, which the reinsurer played an instrumental role in developing, and which serves as a guide for the Alliance members.

It will expand its green, social and sustainability bond exposure to US$4 billion, something to described as “an ambitious target within the industry relative to total assets under management” and increasing social and renewable infrastructure investments by $750 million.

Swiss Re’s Group Chief Investment Officer Guido Fürer said: “We believe that by engaging with the real economy and supporting the companies we invest in to develop a climate strategy and to manage related risks, we will improve our risk-adjusted returns, while also propelling the transition to a net-zero emissions economy.

“While we have already made considerable progress by substantially cutting CO2 emissions of our portfolio, today’s announcement is another important step in the race to net-zero. As asset owners we can play a meaningful role, and I’m pleased to see momentum building amongst the investor community.”

The coal policy is part of the Group’s Sustainable Business Risk Framework which was established already in 2009. In 2020, Swiss Re revised the oil and gas policy in the same framework and in the beginning of 2021 gradually started withdrawing insurance support from the most carbon-intensive oil and gas production.

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