Almost every insurer now has a low-carbon target, BlackRock finds

A significant shift in the insurance industry

In a major shift, the vast majority of insurers globally have set low-carbon targets, according to a new report by investment giant BlackRock. This significant increase in ambition highlights the growing recognition of the urgent need to tackle climate change and the critical role that the insurance industry can play in mitigating its impacts.

A rising trend

BlackRock, one of the world’s largest asset managers, analyzed the carbon transition plans of 212 insurance companies and found that nearly 90% have now set targets for reducing their greenhouse gas emissions. This represents a significant increase from 2019, when less than 50% of insurers had set targets.

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The report, which reviewed data up to December 2022, found that:

• 88% of general insurance companies, which include branches such as auto, health, and life insurance, have set targets.
• 82% of specialized insurers, which focus on specific risks such as marine, aviation, and reinsurance, have also set targets.
• 76% of Lloyd’s of London syndicates and managed insurance operations have set targets.

Why insurers are setting targets

So, why has the insurance industry shifted its focus to reducing emissions? There are several reasons:

• Rising claims costs: Climate-related disasters, such as hurricanes and wildfires, are increasing insurance claims and the industry is recognizing the need to prepare for and manage these risks.
• Reputation and brand: Insurers are now recognizing that setting low-carbon targets is essential for maintaining a positive brand reputation and attracting environmentally conscious customers.
• Regulatory pressure: Governments are introducing stricter regulations, such as the EU’s Sustainable Insurance Initiative, which encourages the industry to take action on climate change.

What’s next

As the industry continues to evolve, what can we expect? BlackRock’s report suggests that:

• More insurers will set science-based targets, aligning with the goals of the Paris Agreement.
• Industry investment in clean energy infrastructure, renewable energy, and green technologies will increase.
• Insurers will increasingly integrate ESG (Environmental, Social, and Governability) factors into their investment portfolios.

Conclusion

The report’s findings demonstrate a significant shift in the insurance industry’s approach to climate change. As the sector continues to set ambitious targets, it will be crucial for regulators, policymakers, and investors to engage with the industry to ensure that these goals are achieved and the industry plays its part in mitigating climate change.

FAQs

• What is the significance of the report? The report highlights the growing recognition of the need to tackle climate change and the critical role that the insurance industry can play in mitigating its impacts.
• What is the goal of the Paris Agreement? The Paris Agreement aims to limit global warming to well below 2°C above pre-industrial levels and pursue efforts to limit it to 1.5°C.
• What are science-based targets? Science-based targets are targets that are set in line with the goals of the Paris Agreement and are based on the best available scientific research and data.
• What is ESG? ESG stands for Environmental, Social, and Governance. It refers to the three pillars of responsible investment, which recognize that environmental, social, and governance considerations are critical for long-term investment performance and sustainable growth.