Two major insurance market initiatives have been launched as the world heads to Glasgow for COP26, as Liz Booth reports
His Royal Highness The Prince of Wales launched the Sustainable Markets Initiative (SMI) Insurance Task Force during a visit to Lloyd’s of London this summer, ahead of the launch of the United Nations-convened Net-Zero Insurance Alliance (NZIA) launch.
The SMI Insurance Task Force, convened by the Prince and chaired by Lloyd’s, is comprised of executives from many of the world’s largest insurance and reinsurance companies, providing an influential platform for the sector to collectively advance the world’s progress towards a resilient, net-zero economy.
With a unique view of the climate crisis, through its many decades of providing support to communities, businesses and economies in the face of increasingly severe and frequent weather events, the global insurance profession has a critical role to play, the Task Force said. Alongside mitigating the impact of these disasters, the profession continues to provide financial support across multiple industries to build greater climate resilience, supporting the increased scale and speed of the transition.
The SMI Insurance Task Force has published a statement of intent, committing to the provision of climate-positive financing and risk management solutions. These are aimed at supporting and encouraging individuals and businesses around the world to accelerate their transition to a sustainable future.
Meanwhile, at the G20 Climate Summit in Venice, a group of leading global insurance companies has made a major commitment with the launch of the United Nations-convened NZIA.
Eight insurers and reinsurers have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050. All the insurers are already working to decarbonise their investment portfolios via their pioneering work as members of the Net-Zero Asset Owner Alliance.
The eight founding members of the NZIA are: AXA (chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re and Zurich Insurance Group.
The UN said: “As risk managers, insurers and investors, the insurance industry has a key role in supporting the transition to a net-zero economy. NZIA members will individually set science-based intermediate targets every five years and independently report on their progress publicly and annually to contribute to achieving the goals of the Paris Climate Agreement, in cooperation with the respective competition authorities.”
The NZIA has also committed to join the Glasgow Financial Alliance for Net Zero (GFANZ). Chaired by Mark Carney, UN special envoy on climate action and finance, GFANZ brings together the leading net-zero financial alliances within the UN’s Race to Zero campaign, representing more than $88trn (£64trn) of assets, to work together to accelerate the transition of the financial sector and the global economy to net-zero emissions.
Two of the biggest challenges to resilience in the insurance market are managing the risks associated with climate change and its impact on the world, and how we can support the transition to a net-zero economy. We cannot understate the important role professionals will have in shaping the products and services used to combat these risks, as well as the advice and support to clients and consumers to mitigate against them
The SMI Insurance Task Force, meanwhile, will also work with governments to establish a public-private disaster resilience, response and recovery framework, which will help protect developing nations from the evolving economic and societal impacts of climate change.
To support the rapid growth of green projects and innovation, the SMI Insurance Task Force will develop a framework to help unlock the more than $30trn (£22trn) of assets under management, increasingly directing capital towards investments that drive climate-positive outcomes in both developed and developing nations.
At the Task Force launch, the Prince of Wales said: “The insurance industry is exceptionally well placed to understand the impact of climate change and the damage it can cause to us all if we do not take action now. This is why I am so pleased that a large number of the world’s leading insurance companies have joined together to identify how the insurance industry can help put nature, people and the planet at the heart of our entire economy.”
He outlined three ways the insurance profession can help:
- Ensure we have the right market signals so that industry, investment and governments know the direction of travel.
- Unlock the ‘investment to investables’ pipeline and increase the number of investable and genuinely sustainable projects, including those that support adaptation and resilience. This also requires that we shift investment away from carbon-intensive assets towards climate risk-resilient assets, including natural capital.
- Find ways to mobilise capital and investment for building climate risk-resilient infrastructure, particularly in the most climate-impacted regions of the world.
Brokers too are joining the movement, with the London & International Insurance Brokers Association (LIIBA) launching a whitepaper, Our Role in Net Zero, which makes the case that London’s specialist brokers, working closely with insurers, possess a unique combination of skills and expertise that will enable businesses to make the changes necessary to achieve the net reduction in carbon emissions required. In the paper, LIIBA also highlights brokers’ role in delivering the UK government’s ambition to position the UK globally at the forefront of green finance.
Christopher Croft, CEO of LIIBA, commented: “Our members will be at the forefront of the drive to achieve net zero by 2050. Today, the climate crisis is the biggest challenge facing our society. Net zero is the government’s response. Across their value chain, businesses need to make deep cuts to greenhouse gas emissions and remove residual emissions from the atmosphere. Attaining that goal will require radical change by organisations – and they will need help.
“Insurers and brokers in particular have a key role to play because of their unique position in the economy. Brokers understand balance sheet risk, they are involved in huge infrastructure projects and international transportation networks, and they’ve developed a detailed world-leading understanding of climate risk. Their role in this change will be critical.
“It is also important to recognise that there will be significant commercial opportunities for the market arising from the drive for net zero,” added Mr Croft.
The CII is also contributing heavily to this movement. Shayne Halfpenny-Ray, public affairs manager, said: “The CII has been a long-term supporter of climate action and we were early signatories of the Cambridge Institute for Sustainability Leadership – ClimateWise initiative.
“Two of the biggest challenges to resilience in the insurance market are managing the risks associated with climate change and its impact on the world; and how we can support the transition to a net-zero economy.
“We cannot understate the important role professionals will have in shaping the products and services used to combat these risks, as well as the advice and support to clients and consumers to mitigate against them.
“This is why we are signatories of the Green Finance Education Chartered and were delighted to recently announce the launch of the first Chartered Bodies Alliance joint qualification in climate risks.
“This unit covers broader environmental and sustainability/environmental, social and governance risks and allows learners to successfully apply these within the context of their organisation. We will continue to do all we can to support our united profession in facing the challenges which lie ahead,” said Mr Halfpenny-Ray.
Liz Booth is contributing editor of The Journal
Image credit | Ikon
Certificate in Climate Risk
The Chartered Body Alliance has developed its first joint qualification, the Certificate in Climate Risk, to support finance and risk professionals globally to develop their expertise in climate risk.
Managing climate-related risks and supporting the transition to a low-carbon world are among our most significant global challenges. The COP26 Private Finance Strategy objective states that every financial decision should include climate change, to help combat the ongoing climate crisis and build a more sustainable world.
The new single-unit certificate, which was jointly developed by the CII, the Chartered Bankers Institute and the Chartered Institute for Securities and Investments, allows learners to successfully apply these within the context of their organisation.
To find out more, visit: www.cii.co.uk/learning/certificate-in-climate-risk/