Reinsurance giants revs up coal phase-out as it pledges to reduce carbon intensity of equity and corporate bond portfolios by 35 per cent by 2025
Swiss Re has announced it is to phase out thermal coal from its treaty reinsurance by 2040, in a move that has been billed by campaigners as a breakthrough for the global reinsurance industry.
The financial services giant, which pledged to achieve net zero emissions across its operations, assets, and liabilities by 2050 two years ago, announced the new coal phase out goal as part of a raft of fresh emissions reduction goals designed to toughen its stance on fossil fuels.
It said it would introduce new thermal coal exposure thresholds for reinsurance and insurance that will decrease over time until a complete coal exit is achieved in Organisation for Economic Cooperation and Development (OECD) countries by 2030 and around the world 10 years later.
Overall, the Zurich-headquarted reinsurer pledged to reduce the carbon intensity of its corporate bond and listed equity portfolio by 35 per cent by 2025 and confirmed its direct real estate portfolio was already aligned with the Paris Agreement's 1.5C warming pathway.
Swiss Re's group chief executive Christian Mumenthaler emphasised that climate change was "the biggest challenge" faced by society and said the financial giant would now be focused on delivery against its goals.
"The stakes are high and require immediate attention," he said. "Signing up to net zero emissions by 2050 and setting concrete climate targets are important first steps. What needs to follow now is action. We are moving ahead in all areas of our business to accelerate the transition towards net zero."
Swiss Re's new targets were commended by campaigners, who called on other insurance companies to follow suit and cut ties with companies funding fossil fuel projects. Campaign group Insure Our Future said the policy, if implemented correctly, marked a "breakthrough" for the reinsurance industry, which has been under increasing pressure to stop enabling environmentally destructive activities.
"We welcome Swiss Re's commitment to a full phase out of thermal coal from its treaty reinsurance and call on all other reinsurance companies to do the same," said Insure Our Future's European coordinator Lindsay Keenan. "Treaty business is a very large portion of the reinsurance trade and it has been a major loophole in coal underwriting that needs to be addressed. Swiss Re has set a benchmark that the rest of the industry needs to follow, now. Now that Swiss Re has responded with an ambitious and clear commitment, we call on Munich Re, Hannover Re, SCOR, Berkshire Hathaway, Lloyd's of London, MAPFRE and Vienna Insurance Group to quickly follow suit."
Swiss Re also announced it would increase investments in renewable and social infrastructure by $750m, while increasing its green, social, and sustainability bond exposure to $4bn at the end of 2024, up from $2.6bn at the end of last year. It has promised to report on progress against these new targets annually.
In addition, the firm announced it had launched a new framework that would see it engage in "active dialogue" with companies in its equity portfolio on their efforts to limit global temperature rises to 1.5C.
Swiss Re chief investment officer Guido Furer said asset managers could play a "meaningful role" in the journey to net zero by encouraging clients to align their operations with climate goals. "We believe that by engaging with the real economy and supporting the companies we invest in to develop a climate strategy and to manage related risks, we will improve our risk-adjusted returns, while also propelling the transition to a net-zero emissions economy," he said.
Swiss Re claims to be the world's first multinational company to have a triple-digit internal carbon levy, after it went ahead with plans to increase its internal carbon price to $100 per tonne of carbon this January. The fee, which is raised on operational emissions and funds carbon removal projects that can help the firm reach its aim of running net zero operations by the end of the decade, will be increased to $200 per tonne by 2030.
Swiss Re previously committed to apply its existing thermal coal exclusion policy and thresholds to treaty business starting in 2023. Today, it announced that in 2023 it will introduce new thermal coal exposure thresholds for treaty reinsurance across its property, engineering, casualty, credit and surety, and marine cargo lines of business before them gradually lowering these thresholds leading to a complete phase out.