Eight re/insurers used this weekend’s G20 climate summit to launch a new alliance to play their part in the transition to a net-zero emissions economy.
The companies were in Venice yesterday to launch the Net-Zero Insurance Alliance (NZIA), convened by UNEP Finance Initiative’s Principles for Sustainable Insurance (PSI), and have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. Each company will be allowed to decide how it will achieve the objective.
The eight founding members of the NZIA are AXA (NZIA Chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re and Zurich Insurance.
In a joint statement they said the alliance was committing to build on their climate leadership as investors through their membership in the UN-convened Net-Zero Asset Owner Alliance (NZAOA) established in 2019, where all eight NZIA founding members are already individually setting science-based 2025 decarbonisation targets for their respective investment portfolios in line with a net-zero transition pathway. Equally, based on the NZIA Statement of Commitment, they will individually set science-based intermediate targets every five years and independently report on their progress publicly and annually. They will also advocate for and engage in governmental policies for a science-based and socially just transition of economic sectors to net zero.
“Through the Net-Zero Asset Owner Alliance launched in 2019, insurers and reinsurers are already working towards decarbonising their investment portfolios in line with climate science and the Paris Agreement,” said Thomas Buberl, CEO of the AXA Group, which chairs the NZIA. “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.”
The commitments that the Alliance members announced include concrete approaches that they can take to achieve their net-zero ambition on an individual basis. These include setting underwriting criteria and guidelines for the most GHG-intensive activities within their underwriting portfolios, engaging with clients and potential clients with 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 and nature-based solutions that absorb GHG emissions, improving claims management in an environmentally sustainable manner, and integrating net-zero and decarbonisation-related risk criteria into their risk management frameworks.
“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,” said Inger Andersen, Executive Director of the UN Environment Programme (UNEP). “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. Guided by science, I am pleased to see leading insurers embed the net-zero ambition in their core insurance business. 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.”
“The NZIA Statement of Commitment is a comprehensive framework and considers the latest available scientific knowledge and associated social impacts, as well as findings of recognised reports such as those by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency’s (IEA) Net Zero by 2050 report,” said the group. “It includes supporting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), considering emerging frameworks such as the Task Force on Nature-related Financial Disclosures (TNFD), supporting the UN Sustainable Development Goals (SDGs) and the Post-2020 Global Biodiversity Framework, and signing the UN Principles for Sustainable Insurance (PSI). The Statement also recommends that insurers transition their investment portfolios to net-zero GHG emissions and join initiatives such as the NZAOA for a total balance sheet approach to net zero.”
“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,” said Mark Carney, the UN Special Envoy on Climate Action & Finance, the UK Prime Minister’s Finance Adviser for COP26, and Chair of the Glasgow Financial Alliance for Net Zero. “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.”
In the run up to 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 said it is now preparing to join the UN Race to Zero campaign in order to become officially part of the Glasgow Financial Alliance for Net Zero (GFANZ) chaired by Mark Carney. GFANZ brings together the leading net-zero initiatives across the financial system.