[UPDATE] Climate change and insurance: how companies are helping out

Insurance companies 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 sharp increases in emissions, predicting an increase of 4.78% in 2021. While companies like ExxonMobil and Amazon have declared their commitment to reducing their carbon footprint, insurance companies have worked to alleviate climate change through ESG commitments of their own.

 

Insurance carriers with ESG or climate commitments

 

Liberty Mutual 

Liberty Mutual announced its commitment to a 50% reduction of global greenhouse gas emissions by 2030, and aims to reach these goals by decreasing its operational carbon footprint and identifying renewable energy opportunities across its real estate portfolio. The carrier recently joined the Partnership for Carbon Accounting Financials to help develop the first global standard to measure and disclose insured greenhouse gas emissions.

 

American International Group (AIG)

American International Group (AIG) released its first ESG report in June, outlining how it’s aligning its sustainability efforts with the insurance group’s core business strategy. 

 

Chubb

Chubb announced plans to stop insuring the Trans Mountain Pipeline in Canada, making it the 16th insurer to drop coverage of or rule out insurance of the tar sands expansion project.

 

Aviva 

The 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. 

 

Swiss Re 

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. 

 

Zurich 

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 

State Farm recently appointed 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. 

 

Allstate

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 

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. 

 

Other auto manufacturers and related companies with ESG commitments

Hyundai announced plans to have all of its new commercial vehicles run on either batteries or fuel cells by 2028, and roll out hydrogen-based technology and mobility solutions across several sectors by 2040. The manufacturer wants to become carbon neutral by 2045 as well. 

Chevron announced in September that it is tripling its investment in its new low-carbon unit, pledging to spend $10 billion through 2028, hoping to create options as the energy system evolves. The company doesn’t plan to invest in solar or wind power generation, stating that those businesses don’t offer as much profit opportunity compared to low-carbon, biofuels and hydrogen technology investments. 

Honda announced last week that it would only introduce electric vehicles in China after 2030, and ditch combustion engine cars globally by 2040. The manufacturer also stated that it will debut 10 electric cars within five years. 

Uber announced that it aims to expand its zero-emissions pledge to its food-delivery sector and make the business environmentally sustainable, but hasn’t committed to a deadline. The tech company declared a 2030 deadline for its ride-hailing sector a few months ago, along with Lyft.

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 better the environment and move toward sustainability. Hopefully, with the U.S. rejoining the Paris climate pact and Biden’s virtual climate summit, more U.S.-based insurance companies can address climate change by declaring their commitment to renewable energy use and lowering carbon emissions in the months to come.