Focus: Partnering with Climeworks

In our quest to “… remove the rest”, in 2021 we entered into a partnership with Climeworks, a leading specialist in direct air capture and storage of carbon dioxide (CO₂).

Reducing global carbon emissions to net zero by 2050 and then making sure they remain net-negative throughout the second half of the century will require massive emission reductions, complemented by the rapid build-up of the carbon removal industry, which is still in its infancy, to reach the size of today’s oil and gas industry.

Carbon dioxide can be removed from the atmosphere through nature-based solutions like afforestation, which also have substantial co-benefits such as improved biodiversity. However, they are limited by other important types of land use and are vulnerable to the risk of stored carbon escaping (“storage reversal”). This is why technological carbon removal solutions like direct air capture are needed to limit global warming to well below 2°C, and preferably to 1.5°C, over the long term. They are more durable and scalable than nature-based solutions, but currently much more expensive, mainly due to their large energy requirements and early stage of development.

The technology offered by Climeworks captures CO₂ from ambient air using geothermal power before injecting it into nearby layers of volcanic rock where it is converted naturally into stable minerals. This is considered the safest and most durable form of all carbon removal solutions that are commercially available at present.

With only a handful of pilots in operation to date, it is, however, also one of the costliest options. Larger, more economic air-capture facilities can only be realised if they are considered bankable by investors. Buyers can contribute to this by committing themselves to long-term purchasing agreements that secure future revenue streams for developers.

In response to this challenge, Swiss Re and Climeworks signed a ten-year carbon removal purchase agreement worth USD 10 million. It is thought to be the first of its kind in the voluntary carbon market for this type of high-quality carbon removal, and thus sends an important demand signal to developers, investors and other buyers.

But bringing climate solutions to scale not only requires the right demand signals, it also creates a need for de-risking and financing. As a recent Expertise Publication launched by Swiss Re Institute argues, the insurance sector is uniquely positioned to offer support on all three fronts (see “Engaging in dialogue with our stakeholders”).

This is why we have also agreed with Climeworks to collaborate on developing risk management knowledge and risk transfer solutions, as well as to explore future investment and project finance opportunities.