For property and casualty (P&C) insurance companies, CO2 emissions stem from four different sources. The insurer’s own operations. The emissions from the insurer’s own operations arise from vehicles owned by the insurer, energy consumption in facilities, business travel, employee commuting, waste generated in operations, and… Read More »Understanding CO2 emissions in the insurance value chain
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… Read More »Sovereign wealth funds step up scope 3 focus
Insurance companies are well positioned to contribute in the global combat against climate change and it is encouraging to see that the insurance exposure – which stands for a large portion of the total emissions of an insurer – is receiving more and more attention.
The global property and casualty (P&C) insurance industry is a massive 1.6 trillion dollar industry and a key part of the financial system offering financial protection and risk mitigation to individuals and businesses. As the recently established Net-Zero Insurance Alliance (NZIA) points out, the insurance… Read More »The carbon footprint profile of a P&C insurer
Extreme weather gives rise to a growing carbon footprint through increased material and energy usage when things that have been damaged are repaired. One could see insurers, reinsurers, and state-run natural perils protection schemes take a stab at how to ensure that the negative climate impact from the extreme weather event itself is minimized. Tools such as sustainable claims settlement with greener repairs, correct pricing of carbon risk, and funding of carbon removal projects could be included in today’s (re)insurance schemes.
Due to the increased focus on scope 3 GHG emissions, more and more financial institutions have begun reporting their scope 3 emissions. That’s good news from a climate perspective, because in order to define meaningful reduction targets, one must first understand the emission sources. It is, however, also worth acknowledging that there are challenges involved in determining these emissions.
It’s important to distinguish between carbon offsetting and carbon removal, because they offer two very different outcomes when it comes to reaching net zero. Considering the climate crisis we’re facing, it’s clearly not enough that businesses just pay others to avoid emissions in their place, because emissions still enter the atmosphere and remain there. If we want to reach net zero fast enough, carbon removal is needed.
Given the challenges the world is facing in reaching net zero, it’s great to see that many large insurance companies are showing leadership and setting strong examples by disclosing ambitious climate goals.
Forerunners will be in a unique position to meet the needs of stakeholders and attract new customers through public disclosure of emissions, progress toward climate targets, and demonstration of environmental stewardship.
So far, most of the insurance industry’s work around climate and greenhouse gas emissions has focused on direct operations and investment portfolios. Next, insurers should establish baselines for their underwriting portfolios and supply chains, in which claims settlement plays a crucial role.
The insured emissions and the claims carbon footprint complement each other fittingly. The insured emissions are relevant for commercial insurance and it’s mainly a question of disclosing which type of companies and industries “you are willing to do business with”. The claims carbon footprint, on the other hand, works across both retail and commercial insurance and only focuses on the actual footprint of the insurance product itself.
As the demands for climate action intensify, insurers are also stepping up their game and trying to find pathways towards net zero. When we talk to people at insurance companies, their concerns and hindrances on this topic largely stem from a sense of lack of alignment. In this article we will briefly discuss each alignment challenge and propose some solutions on how to handle them.