Accelerating towards net zero

Dear stakeholders,

Climate change was back in the spotlight in 2021 after being overshadowed by the global response to the COVID-19 pandemic. As business and political leaders geared up to discuss the climate crisis at the United Nations Climate Change Conference (COP26) in Glasgow, the global community refocused its efforts on avoiding the worst impacts of climate change by limiting the global average temperature increase to well below 2°C, and preferably to 1.5°C, in line with the Paris Agreement. To reach this goal, businesses, governments and civil society must collectively halve global emissions by 2030, achieve net-zero emissions by 2050, and continue to produce net-negative emissions for the following 50 years.

This presents an enormous challenge for society and for Swiss Re. A significant portion of global carbon emissions can be reduced through investments in existing low-carbon solutions that enable energy efficiency gains — that’s the easy part. The real challenge lies in decarbonising sectors such as steel, aluminium or fertiliser production. This will require investments and appropriate incentives to scale up technologies that will enable a massive restructuring of the economy. But to reach net-zero emissions, we will also need to capture and permanently store approximately 10 gigatonnes of carbon from the atmosphere per year by 2050 to compensate for residual man-made emissions and Earth’s own emissions generated by wildfires, for example. This will require building up a carbon removal industry roughly the same size as the oil and gas industry today. In support of a timely scale up, Swiss Re has entered a partnership and signed a ten-year purchase agreement with Climeworks, a leading specialist in carbon dioxide air capture technology.

Although reaching net-zero emissions may seem like a daunting task, we believe it can be achieved through industry and cross-industry alliances. But government policies such as limiting fossil fuel subsidies to encourage businesses to accelerate emissions reductions and scale up innovation, or introducing carbon pricing mechanisms to facilitate a just transition are also needed. At Swiss Re, we are fully committed to working with governments, clients and other stakeholders to reach net-zero emissions in our operations by 2030 and in our underwriting and asset management by 2050.

As a re/insurer, we are both impacted by climate change and play an important role in tackling it. True to our vision of making the world more resilient, one of our key lines of business is providing natural catastrophe re/insurance to help governments, corporates and individuals on the ground with reconstruction efforts in the wake of a natural disaster. In 2021, natural catastrophes caused estimated global insured losses of USD 111 billion, driven primarily by urbanisation, economic growth and wealth accumulation in disaster-prone areas. Climate clearly plays a role in natural catastrophe losses, over half of which were caused by secondary perils such as floods, drought, wildfires or winter storms.

In addition to supporting recovery efforts following climate-related natural disasters, we also help combat climate change by providing risk transfer solutions that help mitigate the associated risks and advance the energy transition. For example, one of our most recent re/insurance solutions supports the expansion of renewable energy in India, while another enables the transmission of offshore wind energy from the northern coast of Germany to consumers in the southern part of the country.

Throughout the year, we have also continued our efforts to decarbonise our underwriting business. In line with our Oil and Gas Policy, we no longer provide individual insurance cover to the most carbon-intensive companies and continue to implement the phase-out of thermal coal-related re/insurance in OECD countries by 2030, and in the rest of the world by 2040.

But measuring the carbon footprint of insurance contracts remains a challenge for the insurance industry. To address this, we co-founded the UN-convened Net-Zero Insurance Alliance (NZIA) in conjunction with several of our industry peers. Together, we are advancing a methodology to calculate carbon emissions associated with insurance portfolios, which will be essential in steering our underwriting business towards less carbon-intensive activities. By providing funding for the development of renewable energy infrastructure and financing green projects, our investments play a critical role in facilitating the transition to a net-zero emissions economy. For this reason, we have committed to holding at least USD 4 billion in green, social and sustainability bonds by the end of 2024. To meet our ambition of a net-zero emissions investment portfolio by 2050, we have set an ambitious intermediate target to reduce the carbon intensity of our corporate bond and listed equity portfolio by –35% by 2025. We have already reduced our carbon footprint by –34% relative to our base year of 2018. As part of our commitment, we intend to set new intermediate targets every five years and report on our progress in our climate-related financial disclosures (TCFD). Engaging with the real economy is also a key component of our Responsible Investing strategy, as reflected in our Engagement Framework. In 2021, 66% of our listed equity holdings were approached on our topic “Alignment of Business Model with 1.5°C Target”.

When it comes to our own operations, our footprint is less sizeable, but by setting a positive example we can inspire others to take action. For instance, we have tightened our business travel emissions reduction target from 30% in 2021 to 50% in 2022, relative to 2018 levels. We have also introduced an internal levy of USD 100 for every tonne of CO2 emitted and have committed to increasing it to USD 200 by 2030. This provides an incentive for everyone within our company to make carbon-conscious business decisions – from business trips to building leases. The funds raised via our new Carbon Steering Levy also allow us to purchase high-quality certificates to compensate the remaining emissions in line with our goal to achieve net-zero operational emissions by 2030.

But we must not ignore the social dimension of sustainability. We are now learning to live with the COVID-19 virus, but the devastating impact of the pandemic on families, businesses and the economy will be felt for years to come. We are extremely proud of how our employees have risen to the challenge. Since the very start of the pandemic, they have worked from home through multiple lockdowns, testing their personal resilience so that we could continue to offer our clients protection against the risks they face. We are grateful to our employees for their dedication and remain committed to providing them with a supportive work environment through initiatives such as our Personal Resilience Strategy and our revised Diversity, Equity & Inclusion Strategy.

At the societal level, however, the pandemic has exposed inequities in access to vaccine distribution and healthcare. To enable the roll-out of COVID-19 vaccines across the globe, Swiss Re is one of several leading insurers supporting Gavi’s COVAX vaccine procurement facility by providing insurance cover for 21 self-paying countries participating in the programme. In Kenya, we are working with a consortium of local insurance providers to provide medical reimbursement cover to frontline health workers who have been disproportionately affected by the pandemic.

Beyond supporting the global COVID-19 response, we are building on various existing pilot projects that provide life and health solutions specifically designed to meet the needs of women, immigrant communities, ethnic minorities and informal workers, among others. To expand these programmes, in 2021 we launched the Swiss Re Life & Health Sustainability Initiative, which aims to improve access, affordability and availability of life and health insurance products to populations that have traditionally been underserved by our industry.

Our Group Sustainability Strategy and our net-zero commitments will continue to guide our efforts. We recognise that we must continuously be aware of the changing expectations of multiple stakeholders, including regulators and civil society. With this comes the added pressure for companies to disclose their sustainability accomplishments in a fair and transparent manner. We will be careful to communicate on our progress towards meeting our sustainability objectives as precisely as possible without overstating our achievements. While certain stakeholder groups may consider the pace of change to be too slow, we believe that lasting progress comes from striking the right balance between building upon past sustainability achievements and taking decisive action. At Swiss Re, we are convinced that we can continue to exert a positive influence by maintaining a dialogue with our clients and by building effective stakeholder partnerships to address our sustainability challenges – and we remain committed to doing so.