Decarbonising our business model
Swiss Re supports the worldwide reduction of greenhouse gas emissions and contributes to the goal of limiting global warming to 1.5°C above pre-industrial levels. We continuously review measures to assist the transition to a low-carbon economy and, formalising our commitment, in 2015 signed the Paris Pledge for Action to affirm our support for the Paris Agreement.
In addition to our risk management, our efforts to fulfil the Paris Pledge for Action include the development of suitable re/insurance solutions for our clients, our Responsible Investing strategy and our operations.
Our commitment to reach net-zero emissions
In 2019, we made a public commitment to reach net-zero emissions by 2050 across our whole business by signing the UN Global Compact Business Ambition for 1.5°C. This joins our active role as a founding member of the UN-convened Net-Zero Asset Owner Alliance, through which we have also made a net-zero commitment specifically for our investment portfolio by 2050.
Thermal coal policy
Through our Sustainable Business Risk Framework, we have continued to implement our thermal coal policy in our underwriting, including direct, facultative and treaty business. We first introduced this policy in mid-2018, pledging not to provide re/insurance to businesses with more than 30% exposure to thermal coal utilities or mining.
For transactions located in low- and middle-income countries that derive more than 70% of electricity from coal, existing power plants (ie operational before 2018) can be covered until 2025 if there is evidence that the insured is implementing an effective emission reduction strategy.
In 2020, we developed an exit strategy for thermal coal in our treaty business (through which we reinsure whole portfolios of direct insurers), holding over 400 client engagements in the process. This treaty approach complements the policies we have already developed focusing on our direct and facultative business. Together, they set us on course to reach our Group-wide target of completely phasing out our thermal coal business in OECD countries by 2030, and in the rest of the world by 2040.
Our approach introduces coal exposure thresholds for treaties across our property, engineering, casualty, credit and surety, and marine cargo lines of business. The initial exposure thresholds will become effective in 2023 and differ for specific lines of business and geographical areas. They will then be gradually lowered until the final phase-out targets are reached.
These coal-related actions in our treaty business are important steps on our path to reaching a net-zero emissions re/insurance portfolio by 2050. They are also in line with the commitment we made in 2019 by becoming a member of the Powering Past Coal Alliance.
Oil and gas policy
We have also committed to shifting away from the most carbon-intensive oil and gas production, and made this public in our 2019 Sustainability Report. You can read more about this commitment and what we have been doing to meet it under Phasing out the most severe oil and gas transition risks.
Carbon steering mechanism
estimated weighted average carbon intensity of our direct insurance portfolio
Our new thermal coal policy and revised oil and gas policy have been introduced as initial steps towards the development of a comprehensive carbon risk steering mechanism. This is needed to measure our carbon intensity and associated risks embedded in our re/insurance business. In 2019, we helped launch a project with peers via the CRO Forum to develop a robust carbon footprinting methodology for the quantification of these exposures.
The project, in which Swiss Re took a leading role, was completed in 2020 with the presentation of a public report (see “Sustainability Leadership in Insurance” event series). We have made progress in applying the methodology to our direct and facultative insurance portfolios. Thus, in 2020 the weighted average carbon intensity of our direct insurance portfolio was estimated to be 120 tonnes of CO2 equivalents per million USD of revenue. Continuously measuring our carbon footprint in line with the methodology proposed by the CRO Forum will provide the basis for our carbon steering towards reaching net-zero emissions on the liability side of our business by 2050.