By Amy Barnes ,
Director, Sustainability and Climate Change Strategy
Following on from COP26’s Finance day, Oliver Wyman’s Rob Bailey spoke this afternoon at the UNDP Sustainable Insurance Forum (SIF)’s virtual event. He and other speakers drew conclusions from yesterday’s sustainable finance announcements in relation to nature-related risks in the global insurance sector.
Bailey spoke on the need for “insurers to formulate new approaches to managing risk and developing nature positive insurance products.”
Today, however, the theme at COP26 was “Energy Day” where various governments reasserted that the shift to clean power is both necessary and accelerating. They spoke about efforts within their countries to make clean energy more affordable, and discussed what could be done to improve energy efficiency.
The day was filled with the sharing of best practice and collaboration. During the Energy Transition Council’s morning event, governments and international organizations outlined the measures they intend to take to more quickly scale up clean power and sustainable energy.
Today’s afternoon sessions focused on the infrastructure needed to ensure a smooth energy transition — as well as the important role non-state actors will play in this.
The financial sector has been a key accelerator for the transition to clean energy. Now, attention is turning to underwriting within insurance, and the crucial role that insurance can play in the transition to net-zero emissions.
With timeliness a key factor in these COP26 discussions, there is scope for underwriting to be a more immediate tool for change.
Underwriting as an enabler of the transition requires a fresh approach to the development of new product offerings. Insurers are now exploring sophisticated tools and strategies, such as portfolio warming metrics, to steer their underwriting portfolios towards net-zero emissions on an orderly pathway.
Of the four COP26 goals, the most critical is securing global net zero by mid-century and preventing global warming from rising by more than 1.5 degrees above pre-industrial levels.
In order to achieve this, all countries are expected to present and commit to ambitious 2030 emissions reduction targets.
These targets will revolve around the UN’s four-pronged approach of phasing out of coal, acceleration of the switch to electric vehicles, curtailing deforestation, and increased investment in renewable energy.
With increased innovation in renewable energy and electrification spaces, the insurance industry will need to find ways to better embrace the unknown and the novel. This will ensure the industry is an enabler of progress during the energy transition.
This blog is part of the COP26 series.