Insurers around the world have started to take stronger stances on ESG (environmental, social and governance) issues in recent years to address climate change, with many developing carbon reduction plans to alleviate their business’s impact on the environment.
Although the global pandemic slashed carbon emissions last year by 5.8% (the steepest percentage decline since WWII) by keeping people off the roads, grounding planes and temporarily shutting down plants and factories, the International Energy Agency reported that the numbers are sharply climbing up again and are predicting an increase of 4.78% in 2021. While companies like ExxonMobil and Amazon have declared their commitment to reducing their carbon footprint, insurance carriers from around the world have been actively working on aligning their initiatives to bettering the environment as well.
UK-based P&C giant announced its plan to become a carbon net-zero company by 2040, making it the first insurer to make such a big commitment. The company stated that it will increase its green investments and allocate 10 billion pounds from its auto-enrolment default funds and other policyholder funds into low-carbon strategies by the end of 2022. The insurer also stated it will stop underwriting companies that make more than 5% of their revenue from coal unless they have signed up to the Science Based Targets initiative by the end of 2021, and divest from companies that failed to meet the initiative’s criteria by the end of 2022.
Global reinsurer Swiss Re announced new measures to transition to a carbon net-zero company by 2050, with a reduction target for its investment portfolio of 35% by 2025 and a complete phase-out of thermal coal across its property, engineering, casualty, credit & surety and marine cargo lines by 2040. The reinsurer is the first multinational company to introduce a triple-digit real internal carbon levy on direct and indirect operational emissions.
Lloyd’s of London
Lloyd’s of London announced at the end of 2020 that it will phase out new investments for thermal coal-fired power plants, thermal coal mines, oil sands, and new Arctic energy exploration activities from 2022 and plans to be completed by 2030. The company also plans to allocate 2% of annual premiums towards innovative and sustainable products by 2022, stating that this is the first time it has set an ESG strategy for the Lloyd’s market.
Swiss Insurer Zurich Insurance Group committed to holding a net-zero investment portfolio by 2050 and stated that it will use its influence as an investor and insurer to press for change. A couple of the company’s more immediate goals are a 25% cut in carbon intensity in listed equity and corporate bond investments and a 30% carbon cut for direct real estate investments in the same by 2025. The insurance group also reported a goal to cut carbon emissions from operations by 50% by 2025, and 70% by 2029.
State Farm recently appoints its first-ever chief sustainability officer in December 2020 and made its first-ever ESG Snapshot report in March 2021 and declared that it would reduce its greenhouse gas emissions by 50% by the end of 2030. The carrier’s commitment to lowering its carbon footprint will focus on cutting both direct emissions coming from its facilities and vehicles and indirect emissions from its sources of power.
Previously, Allstate reduced its greenhouse gas emissions by 14% in 2018, following an 8% reduction in 2017. In October 2020, Allstate became one of the select property and casualty insurers to join the CDP Supply Chain, a global non-profit disclosure system that enables companies to measure and manage their environmental impact. This move serves as a major sign that the carrier takes climate risk and environmental transparency seriously; Allstate is requesting its key suppliers to begin reporting emissions data to CDP as it continues to work on mitigating emissions.
American Family Insurance planned to offset the company’s impact on the planet and announced in October 2020 its commitment to achieving carbon neutrality by 2030. According to the carrier’s Sustainability and Climate Action Strategic Plan, the company declared to use more renewable energy sources to power facilities, work towards zero waste, implement sustainable land-management and development practices and increase its national climate-related partnerships.
While the resurgence in carbon emissions shows that the economy is in recovery from the COVID crisis, there is still a lot of work to be done to bettering our environment and becoming truly sustainable. Hopefully, with the U.S. rejoining the Paris climate pact and Biden’s virtual climate summit, more companies based in the U.S. can declare their commitment to renewable energy and lowering carbon emissions in the months to come.