Zurich Insurance: After Us, the Deluge?
Zürich under water, as imagined by the artist Res Rothacher
As the climate crisis is escalating, we can’t keep track of the devastating record floods occurring around the world right now. Regulators, corporations and other interested actors have agreed on transition plans as the best way to encourage the shift from fossil fuels to a clean economy. Yet Zurich just demonstrated that without strict guidelines, such plans can amount to little more than obfuscation.
Insurance companies can be important levers to accelerate the shift from fossil fuels to clean energy. In January 2023 the Net Zero Insurance Alliance defined some modest minimum targets for meaningful transition plans in the sector. The NZIA has meanwhile fallen apart but the insurers which left the alliance insisted that their departures would not diminish their climate commitments. Their minimum targets are thus still the best benchmark for credible transition plans.
Zurich was one of the first insurers to move away from coal in 2017 but with $520 million in estimated annual premiums, is a leading oil and gas insurer. For years Zurich has told us that they aim to reduce their emissions comprehensively rather than tightening their oil and gas exclusions, so the climate transition plan which they published last week is a test for the seriousness of their climate commitments.
Disappointingly, Zurich’s plan is far weaker than the minimum targets which they helped define – and also than the targets of their insurance peers:
(1) Deadline: Under the NZIA guideline, insurers committed to completing their first transition plans by July 2023. Zurich missed this deadline by more than a year, which doesn’t indicate a great sense of urgency for climate action. We could ignore this if the plan was strong but this is not the case.
(2) Emission reduction target: The IPCC found that emissions need to be reduced by 43% from 2019 to 2030 to limit global warming to 1.5°C. In their guideline, insurers settled for a more modest target range of 26-49% for the 2022-2030 period. In comparison Zurich aims to reduce the emissions of its large corporate customer portfolio by a mere 20% for the same period.
We need a reduction in absolute emissions to avoid catastrophic climate change. Zurich however only aims to reduce the emissions intensity of its large corporate portfolio by 20%. In other words it needs to reduce its absolute emissions less if its portfolio grows. The NZIA guideline allows such intensity targets as long as they result in a reduction of absolute emissions by at least 34%, but Zurich clearly doesn’t aim for this.
Zurich’s target is not just lower than the threshold set by the guideline it helped prepare. It is also more modest than the targets of its peers and competitors. Allianz and AXA have set 2030 reduction targets for their corporate portfolios of 45% (intensity target) and 30% respectively, and the smaller insurers ASR, Fidelis and NN, of 26% each. Generali has still not published its emission reduction targets. And unlike Allianz and AXA, Zurich hasn’t set any target for the emissions from its car insurance.
(3) Scope: As the saying goes, what gets measured gets done. In their guideline, insurers agreed that their targets should cover not just scope 1 and 2 emissions (i.e. their customers’ own emissions and the emissions from the energy they buy) but “where significant and where data allow”, also the scope 3 emissions which they insure (i.e. the emissions from their customers’ products). This is particularly relevant for oil and gas companies, where scope 3 emissions account for 75-80% of all emissions.
In the small print of its plan, Zurich reveals that it doesn’t aim to reduce the scope 3, but only the scope 1 and 2 emissions of its large customers. In other words, Zurich can claim that it is meeting its target if its fossil fuel customers are producing oil and gas more efficiently – even if they massively increase their production. This is a sad joke and I’m not aware of any other insurers which have undermined their emission reduction targets with such a glaring loophole.
To its credit, Zurich in April 2024 adopted a policy ruling out further insurance for new oil and gas exploration and extraction projects. Yet Zurich continues to insure oil and gas companies which are expanding their production. In its transition plan the insurer commits to engaging 450 large corporate customers on their transition and “as a last resort”, drop customers “where transition risks are not sufficiently managed” by 2030. This includes oil and gas companies which haven’t adopted “credible transition plans” aligned with the Paris Agreement.
This commitment is impressive but not convincing. Zurich’s own target gives oil and gas producers a pass on the emissions from the fossil fuels they produce and is far from aligned with the goals of the Paris Agreement. The insurer could have defined more meaningful targets if it expected its engagement strategy to work, and isn’t likely to require more from its customers than what it is prepared to do itself.
My native city Zürich has for many years pursued ambitious climate policies. As my friends at the Insure Our Future campaign and at Campax have argued, Zurich’s transition plan is too little, too late. The insurer doesn’t deserve to borrow my hometown’s name.
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