This article first appeared on Environmental Finance. You can find the article here.
The recent departures of Munich Re, Zurich and Hannover Re from the Net Zero Insurance Alliance (NZIA) have created a lot of debate. Amidst all the noise it’s important to remember the following basic facts about net zero commitments.
Munich Re has cited antitrust concerns as the reason for their departure. Yet the UN Race to Zero and the NZIA have always emphasized that the responsibility for climate action rests with their individual members.
The UK Competition & Markets Authority recently published draft guidance to ensure that antitrust law enforcement didn’t “unnecessarily or erroneously deter” businesses from taking collective climate action. The EU and US antitrust authorities should issue similar clarifications, and the Net Zero Lawyers Alliance could make a helpful contribution to this.
Even if antitrust concerns have no legal merit, they are being used as a political cudgel by the fossil fuel industry and its political servants in the US.
It was always clear that the transition away from fossil fuels would face stiff opposition.
Munich Re, Zurich and Hannover Re derive about one third of their revenues from the US market and are vulnerable to its political follies. Net Zero alliance members that are less exposed should call out the current anti-ESG campaign as the cynical ploy of the fossil fuel lobby which it is, rather than continuing to coddle their coal, oil and gas clients.
Regardless of whether they are members of net zero alliances, financial institutions are ultimately responsible for aligning their businesses with credible 1.5°C pathways. The Race to Zero campaign and the HLEG Integrity Matters recommendations have prepared a helpful interpretation guide and are about to publish a checklist on what this means in practice.
Munich Re, Zurich and Hannover Re have all confirmed that they will continue to uphold their net zero commitments even after leaving the NZIA. Through their departures they have invited even more scrutiny of their climate actions.
By joining the Race to Zero campaign, the three insurers committed to prepare transition plans by June 2023, demonstrating how they will phase down and out their support for fossil fuels over the short, medium and long term. Climate campaigners will hold them to account for this commitment.
In spite of the noise about the high-profile departures from the NZIA, the transition away from fossil fuels continues and is inevitable.
“When the Sustainable Insurance Forum and the International Association of Insurance Supervisors convene for their annual meetings in Tokyo in November, they should create working groups to drive forward the regulation of the net zero transition”
More financial institutions have joined existing or new net zero alliances than departed in recent weeks. In the insurance sector, leading property and casualty carriers Chubb and Talanx (the parent company of Hannover Re) have adopted new restrictions on underwriting oil and gas projects since March and others are expected to follow suit.
The NZIA and other alliances should make it clear that the transition from fossil fuels to clean energy is inevitable and that their members will benefit from being leaders in this transition.
The weaponized antitrust campaign is a headache for some climate leaders and an easy excuse for continued inaction for climate laggards. Some financial institutions have argued that they can’t take individual action due to competitive pressures and now argue that they can’t take collective action due to antitrust concerns. They are making a strong case for stronger regulation.
When the Sustainable Insurance Forum and the International Association of Insurance Supervisors convene for their annual meetings in Tokyo in November, they should create working groups to drive forward the regulation of the net zero transition.