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January 18, 2023

Net zero insurance protocol launched at Davos

Insurance and reinsurance companies should start measuring and reporting on efforts to reduce emissions in line with a 1.5C pathway across their businesses, including downstream emissions.

The UN-convened Net-Zero Insurance Alliance launched its first target-setting protocol on Tuesday at the World Economic Forum’s annual meeting in Davos, requiring members to set and disclose by July 31 2023 their initial targets for bringing portfolios in line with a 1.5C compliant net zero transition pathway.

Launched 18 months ago at the 2021 G20 climate summit in Venice by eight insurers and reinsurers, the alliance today boasts 29 companies representing about 15 per cent of world premium reinsurance and insurance volume globally.  

The protocol signals the alliance’s move from “commitment to implementation”, said Butch Bacani, who leads the UN Environment Programme’s Principles for Sustainable Insurance Initiative, which created the NZIA. 

Speaking at a press call ahead of the launch, Renaud Guidée, NZIA chair and chief risk officer at AXA, said the protocol was the result of “broad leadership and followship”. Leadership because “we are showing the way… with a practical and concrete framework, and putting our balance sheet where our mouth is”, said Guidée, and “followship” because “the basic premise is that we are stronger together”.

The protocol outlines five target types within three target categories. The first category is focused on reducing emissions, with targets for overall and sectoral emissions; the second category is on engagement related to general portfolio coverage and more focused targets; and the third category is specifically linked to transition targets in the re/insurance industry.  

Existing NZIA members must set at least one of the five target types by July 31 2023, and at least one target type in each of the three target categories by July 31 2024. Those joining the alliance after January 2023 will have six months to set their first target and one year after that to set a target type in each of the three categories.

The targets should, where possible, cover Scope 1, 2 and 3 emissions, meaning they should also deal with emissions downstream in company supply chains. 

The insurance industry has been viewed as most closely linked to adaptation and resilience, not mitigation, said Bacani in the press call. But it was, he added, “no longer just about the insurance industry, but about what activities are being insured and their impact on the environment and society”.

The protocol also contains recommendations around publishing targets and reporting on progress towards them, highlighting gaps in emissions data from the re/insurance industry and the “lack of science-based guidance for credible target setting in all sectors”.

The alliance has said it will continue collaborating with the Science Based Targets initiative. For the moment, NZIA members will have to report publicly on an annual basis on progress towards their commitments “in whatever form and detail they consider appropriate”. 

A service from the Financial Times