Decarbonising our business model
Swiss Re supports the worldwide reduction of greenhouse gas emissions and contributes to the goal of limiting global warming to 1.5°C above pre-industrial levels. We continuously review measures to assist the transition to a low-carbon economy and, formalising our commitment, in 2015 signed the Paris Pledge for Action to affirm our support for the Paris Agreement.
Our efforts to fulfil the Paris Pledge for Action include the development of suitable re/insurance solutions for our clients, our Responsible Investing strategy and reducing the footprint of our own operations. In our risk management, we focus on the carbon intensity and the associated risks embedded on the liability side of our balance sheet.
Our commitment to reach net-zero emissions
In 2019, we made a public commitment to reach net-zero emissions by 2050 across our whole business, by signing the UN Global Compact Business Ambition for 1.5°C. This joins our active role as a founding partner of the UN-convened Net-Zero Asset Owner Alliance, through which we have also made a net-zero commitment specifically for our investment portfolio by 2050.
Thermal coal policy
Through our Sustainable Business Risk Framework, we continued with the implementation of our thermal coal policy in our underwriting, including direct, facultative and treaty business. We first introduced this policy in mid-2018, pledging not to provide re/insurance to businesses with more than 30% exposure to thermal coal utilities or mining.
For transactions located in low- and middle-income countries that derive more than 70% of electricity from coal, existing power plants (ie operational before 2018) can be covered until 2025 if there is evidence that the insured is implementing an effective emission reduction strategy. Implementation of the thermal coal policy for treaty business will follow a staggered approach until 2023. With our 2019 net-zero commitment on the liability side and by joining the Powering Past Coal Alliance in 2019, we are fully committed to a total phase-out of thermal coal from our business in the long term.
The introduction of our thermal coal policy was designed as a first step towards the development of a comprehensive carbon risk steering mechanism to measure our carbon intensity and associated risks embedded in our re/insurance business. In 2019, we helped launch a project with peers via the CRO Forum to develop a robust carbon footprinting methodology to quantify these exposures.
The project, in which Swiss Re took a leading role, was completed in 2020 with the presentation of a public report. We have made progress in applying the methodology to our direct and facultative insurance portfolios. Thus, in 2020 the weighted average carbon intensity of our direct insurance portfolio was estimated to be 120 tonnes of CO2 equivalents per million USD of revenue. Continuously measuring our carbon footprint in line with the methodology proposed by the CRO Forum will provide the basis for our carbon steering towards reaching net-zero emissions on the liability side of our business by 2050.
Phasing out the most severe climate-related transition risks
In 2019, we took another important step in our carbon steering mechanism and developed a policy to shift away from the most carbon-intensive oil and gas production.
From July 2021, we will no longer provide individual insurance covers for those oil and gas companies that are responsible for the world’s 5% most carbon-intensive oil and gas production.
From July 2023, we will no longer provide individual insurance covers for those oil and gas companies that are responsible for the world’s 10% most carbon-intensive oil and gas production.