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The road to climate investing – a journey for insurers

The road to climate investing – a journey for insurers

15-04-2022 | Insight

Climate change is a major issue for insurers as the industry signs up for net zero carbon commitments while also trying to maintain returns.

  • Hilde Faber
    Hilde
    Faber
    Global Insurance Consultant

It is doubly important for the insurance industry, which is hit twice when it comes to tackling global warming. The bill for claims for weather-related damage is rising, while asset values which underpin the ability to meet liabilities will fall if the future climate risk is not removed.

So, how can insurers achieve the seemingly impossible and reduce their claims exposure while also reducing carbon risk in portfolios – and at the same time meeting their global responsibility towards net zero?

In an in-depth Q&A, Hilde Faber, Robeco’s global insurance consultant, answers several questions on how insurers can do this. She explains what the net zero commitment really means in practical terms, and why meeting the Paris Agreement through decarbonization matters so much for modern business.

Measuring carbon and risk

One section examines what other insurers are doing, partly through membership of the Net Zero Asset Owner Alliance, of which half are insurance companies. The question of how insurers can actually measure high carbon in their portfolios is tackled in depth, along with the vexed issue of including Scope 3 emissions.

If optimizing insurer considerations and implementing net zero sounds contradictory, Faber shows how this can be done in the kind of buy-and-maintain portfolio that many insurers embrace. The regulatory view of this issue is addressed, along with what it means for future investment performance, assessing risk and meeting disclosure requirements.