Revealed: The climate impact of Europe's biggest insurers 4

Revealed: The climate impact of Europe’s biggest insurers

climate

Just four of Europe’s biggest insurance companies funded more climate pollution across the globe in 2021 than Scotland produces each year, analysis by The Ferret has found. 

Germany’s Allianz, France’s AXA and CNP Assurances, and Italy’s Generali caused the equivalent of at least 40.2 million tonnes of carbon dioxide (CO2) to enter the Earth’s atmosphere last year. 

The pollution caused by the firms — which is created by their investments in other industries and contributes to the climate crisis — was also comparable to that produced annually within the borders of other medium-sized European countries including Portugal and Switzerland

The firms are among the five biggest players in the continent’s insurance industry. The other company which ranks among the top five European insurers — the UK’s Aviva — does not report the exact emissions from its investments. But these will also be significant. 

The insurers have all reduced the emissions produced by their investments since they were first reported in 2019, a step which they have called “key in the race for net zero”. They also claim that they are allocating large amounts of funding to green technologies, including renewable energy

Insurance companies are viewed as having a unique role in the climate crisis, because they fund and underwrite risks for the industries that cause global warming, while also covering people against its impacts.

Green campaigners claimed it was time for them to “choose which side they are on” and “support citizens to protect themselves against the impacts of the climate crisis, rather than putting fuel on the fire with dirty investments”. 

Meanwhile, a former head of insurance at a major French investment bank said The Ferret’s findings showed insurers should be using their “vast investment power” to drive “more radical change in both society and the energy industry”.

The Ferret’s findings come from the insurer’s annual sustainability reports which they have each published through the first half of 2022. The emissions come from investments in company stocks and shares, corporate and government bonds, and property. 

Allianz is Europe’s biggest insurer and also had the largest reported carbon footprint of any of the continent’s insurance firms in 2021. 

Europe’s insurance industry needs to choose which side they are on. It is high time for them to fully divest from fossil activities and support citizens to protect themselves against the impacts of the climate crisis

Klaus Ruhrig, climate and energy coordinator at Climate Action Network Europe

Its investments caused the equivalent of 18.7 million tonnes of CO2 to enter the atmosphere last year. This was a yearly reduction of 3.5 million tonnes from 2020. 

Over seventy per cent of this pollution came from its funding of companies in just three sectors — electricity supply, transport, and mining.

Generali also reported emissions from investments of over 10 million tonnes, with these decreasing by just over 11 per cent between 2020 and 2021. 

Axa — which produced just under seven million tonnes of CO2 in 2021 — reduced its annual investment emissions by 2.6 million tonnes in 2021. CNP’s funding of four million tonnes of emissions was also a reduction from the previous year. 

The combined 40.2 million tonnes of investment emissions reported by the four insurers was slightly higher than Scotland’s territorial emissions in 2020 — the most recently available data — when the equivalent of exactly 40 million tonnes of CO2 was produced. 

The firms have pointed out that Scotland’s emissions only include what is produced within its borders, and not those from its overseas activities or oil and gas, but the comparison still reveals the scale of the task the four companies face in reaching their climate targets. 

True climate impact still emerging

The Ferret’s analysis is a snapshot of the major contribution that Europe’s insurance industry makes to the climate crisis, but its actual emissions are expected to be even larger

There is not yet a standardised approach to measuring the total emissions from insurers’ investments. 

A number of insurers — including Aviva — currently only publish the average carbon intensity of their portfolios, and not the total emissions that they produce. When Aviva’s emissions are included, the pollution produced by Europe’s five biggest insurance companies alone is likely to be much higher than 40 million tonnes.

Similarly, the industry is still developing a method to understand the climate emissions that it facilitates by underwriting projects for high-polluting industries.

Without insurance, new fossil fuel exploration and production projects are unable to go ahead. It is estimated that insurers around the world receive £13.7bn each year in premiums from oil and gas projects.

“The Ferret’s insightful research highlights that European insurers could be a lot greener. In particular, many of their investments are still funding polluting industries”

Nick Holmes, the former head of insurance at the French investment bank, Societe Generale

Major investors across the world are facing similar pressure to insurance companies to decarbonise the projects and infrastructure they invest in. 

The role of insurers is under particular scrutiny, however, because they protect people against climate risks. They have been accused of “hypocrisy” for still having dirty investments because they have known about the dangers of climate change for nearly fifty years. 

For example, they were criticised earlier this year for having invested billions of pounds in North Sea oil and gas companies while simultaneously hiking the premiums paid by UK homeowners at risk of climate-related flooding. 

The climate crisis is also a financial threat to the insurance industry itself. They will be liable to pay out to policyholders whose property is damaged by the increased frequency of extreme weather and natural disasters which will accompany a heated climate. 

Economic losses from winter storms across Europe in February 2022 are believed to have been £4.26bn. Around £2.8bn worth of this damage was covered by insurance. 

Klaus Ruhrig, a climate and energy coordinator at Climate Action Network Europe, pointed out that “natural disasters exacerbated by climate change” have cost insurers over £30bn globally since the start of 2022. 

Ruhrig told The Ferret: “This is a 22 per cent increase compared to the past 10 years, according to recent figures from reinsurer SwissRe

“Europe’s insurance industry needs to choose which side they are on. It is high time for them to fully divest from fossil activities and support citizens to protect themselves against the impacts of the climate crisis, rather than putting fuel on the fire with dirty investments.”

Nick Holmes, the former head of insurance at the French investment bank, Societe Generale, argued that while insurers were taking steps in the right direction, they could be doing more to mitigate their climate footprint. 

“The Ferret’s insightful research highlights that European insurers could be a lot greener. In particular, many of their investments are still funding polluting industries,” Holmes said. 

“While it’s true that insurers have made significant progress in some areas – notably exiting coal insurance, which has been a real win for the green energy industry – they could be using their vast investment power to drive even more radical change in both society and the energy industry. Sadly, this is still lacking.” 

Audrey Changoe, trade and investment campaigner at Friends of the Earth Europe said: “The climate crisis is upon us – we see its global impacts every day.

“Corporations, banks and investors like insurers must now use their responsibility to halt the disaster instead of trying to greenwash their way out of it.

“Shifting their money to support a just transition to renewable energies is a necessity, not a choice.”

Allianz said that it is “rigorously” pursuing its targets to cut the amount of carbon it produces in order to reach net-zero emissions by 2050, and that “full transparency” on financed emissions was a key part of this effort. 

More of our coverage of climate and finance in The Ferret’s archives, here.

The firm added that it was investing in solutions to environmental and societal challenges and engaging with high-polluting industries in its portfolio to accelerate their transition to a greener future. 

An Aviva spokesperson said: “We publish a weighted average carbon intensity measure for listed equity and corporate bond asset classes because there isn’t an agreed standardised methodology to measure absolute emissions for every asset class yet.

“As a responsible investor, we have decided to take active ownership of our investment portfolios to achieve our Net Zero goal. 

“We believe divestment would be an easy option; it is not the way to influence systemic change in an industry or sector and it would change little in the real world. We want to be an active owner and use our position in the market to push companies we invest in to commit to ambitious climate action – and drive the economic transition required.”

Axa, Generali and CNP Assurances declined to comment. 

The Ferret has received funding from the Sunrise Project to investigate the insurance industry’s involvement in the North Sea oil and gas industry and retains complete editorial control.

Image Credit: iStock/martin_33

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