Insurers opt for à la carte climate commitments

The international coalition Net Zero Insurance Alliance has published the protocol that should help its members define a roadmap aligned with the Paris Climate Agreement. After the setbacks of other alliances of financial players, it leaves a lot of latitude to its members.

After banks, asset managers, and institutional investors, insurers are also preparing to make joint commitments to combat global warming. The international coalition Net Zero Insurance Alliance (NZIA) unveiled on Tuesday, at the World Economic Forum in Davos, the protocol that should allow its 29 members to publish a roadmap to decarbonize their core business, risk coverage.

By July 30, AXA, Allianz, Crédit Agricole Assurances, and other major insurers and reinsurers will have to set at least one goal, out of five proposed, in order to align their activities with the Paris Agreement. Namely a scenario of limiting global warming by 1.5° by 2100.

The car insurance concerned

The NZIA protocol is ambitious because it aims to transform insurers’ commitments into concrete solutions and covers a very wide scope, which includes financial services for individuals for the first time,” says Renaud Guidée, AXA’s chief risk officer. Beyond companies, these commitments will thus relate to household car insurance.

However, NGOs remain skeptical. “If there is one sector that must be aware of the damage that climate disasters are already causing, it is the insurance sector. However, the NZIA arrived late to the negotiating table and the guidelines of its protocol testify to a staggering lack of ambition,” says Paddy McCully, senior analyst at Reclaim Finance.

Concretely, the protocol leaves a great deal of freedom to the signatories, who account for 15% of the global insurance market. Each of them will be able to define their priority objective(s) to achieve carbon neutrality by 2050. The NZIA lists five of them: two relating to the reduction of CO2 emissions from insured activities, two in terms of “commitment” (related to the investment choices of insurers or their role as shareholders of companies), and finally one to develop the insurance of green activities.

By this summer, insurers will have to choose a first objective. Then three in total next year. “From 2024, the insurer’s members of the NZIA will have to take a firm objective of reducing greenhouse gas emissions, specifies Renaud Guidée. This will lead to a concrete transformation of the subscription portfolios. »

Members will be able to opt, as they wish, for a global action plan… or for a single sector of activity. This leaves room to continue to ensure other activities that emit high greenhouse gases. Especially since insurers will not be forced to take into account the so-called scope 3 (indirect) emissions, which are dominant but still difficult to quantify.

Boomerang effect

“The NZIA does not learn from the shortcomings of other alliances, judge Paddy McCully. The NZIA protocol is clearly less ambitious than that of institutional investors (NZAOA), which is more credible. It is all the more surprising that some major players are members of both alliances. “According to Reclaim Finance, the NZIA protocol is also less ambitious than that of banks (NZBA) and comparable to that of asset managers (NZAM).

The insurers undoubtedly wanted to guard against the shortcomings of the other coalitions: setting too ambitious or precise objectives exposes them to virulent criticism of “greenwashing”, or may dissuade certain actors from joining the movement.

Vanguard, the world’s number two management company, slammed the door on NZAM last month. It applied climate objectives to… 0% of its assets under management. To keep room for maneuvering and avoid possible legal proceedings, the American bank’s JP Morgan, Morgan Stanley, and Bank of America have meanwhile threatened to leave the Glasgow Alliance (GFANZ), which brings together the alliances of the finance sector under the aegis of the UN.

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