Sovereign wealth funds step up scope 3 focus

On September 20th, 2022, the world’s largest sovereign wealth fund, the Norwegian Oil Fund, presented its 2025 climate action plan.

The fund lays out significant ambition aiming at “driving our portfolio companies towards net zero in 2050”. This is against the backdrop that delayed climate actions has been identified as the largest financial risk to the fund.

On a practical level, we should note the following:

“We will update our expectation document on climate change to sharpen our engagement with companies by asking for science-based short-term, medium-term and 2050 net zero targets and credible transition plans covering scope 1, scope 2 and material scope 3 emissions, and improved disclosures on performance.”

Norwegian Oil Fund – 2025 Climate Action Plan

For insurance companies this means that as “material scope 3 emissions” are in focus, the emissions arising from helping customers following an accident or some other insured event, will get increased attention, at least from this investor.

It’s safe to assume that other sovereign wealth funds and large institutional investors will follow suit and implement similar expectations.

The material scope 3 emissions will for most insurers be the downstream emissions linked to their investment portfolio, the so-called financed emissions, and the claims carbon emissions linked to the insurance exposure.

The former is well understood whilst we at Claims Carbon focus on helping insurers with the latter. We do this by delivering software and services that allow insurers to identify and calculate claims carbon hotspots, set meaningful science-based reduction targets in claims handling, and ultimately develop net-zero insurance products.

Image credit: Robert Bye @ Unsplash