The United Nations Framework Convention on Climate Change’s (UNFCCC) new Finance Climate Action Pathway 2021 provides an ambitious and detailed roadmap for the financial markets to support the transition to a net-zero future.
Launched in 2019, the Climate Action Pathways set out sectoral visions for achieving a 1.5° C resilient world by 2050, with transformational milestones and key actions that need to be achieved to realize them.
For the financial sector, the goal is that by 2050, markets are placed to fund a zero-carbon world. The pathway’s targets, proposed transition process, and deadlines are outlined in this global insight report.
As wide-ranging as it is far-reaching, the UN’s action plan envisages the following by 2050:
The pathway provides a comprehensive timeline in order for the 2050 deadline to be met. Here are some of the targets.
In the first phase, insurers are urged to integrate the TCFD recommendations. As the transition gets underway, they are called upon to engage insureds to assess and report all climate-related risk. By 2040, the aspiration is to have insurers’ underwriting and investment portfolios aligned with achieving net-zero emissions, while supporting resilience to climate-related impacts.
Not all markets are moving at the same speed to achieve these non-binding goals, and at present European markets appear to be taking the lead.
A number of European bodies are already working on the pathway’s objectives, including ClimateWise, the Sustainable Markets Initiative, and the Net-Zero Insurance Alliance.
The UNFCCC advocates for continued and increased mandating of climate reporting (for example, via the TCFD’s recommendations) as key to realizing the ambition of net-zero underwriting in the timeframes the pathway has laid out. Underwriters will ultimately seek more information from insureds on both their current status regarding net-zero objectives and transition commitments.
For more information, please contact your Marsh advisor.