Climate change is widely recognised as one of the biggest threats that defines the 21st century. At the 2021 United Nations Climate Change Conference (COP26), nations adopted the Glasgow Climate Pact, reaffirming the goal to reach global net zero by mid-century and to limit the rise in global average temperature to 1.5 degrees Celsius.
It also underlined the importance of taking climate into account for every financial decision, calling for international financial institutions to play their part in innovating and delivering the resources needed to achieve net zero.
The insurance industry has an instrumental role in facilitating the transition to carbon neutrality. Insurance companies, by nature of their role as ‘financial first responders’, have been at the forefront of sustainability issues and are familiar with the issues that must be addressed. The significant financial impact of climate change means sustainability matters have become increasingly material for insurance companies, with major players most likely to be challenged by stakeholders on their strategy, engagement, risk management and investments, to act now to raise the ‘bottom line’.
Identifying the risks and challenges in Asia
Insurance has a crucial role in anticipating, identifying and managing climate-related risks, especially in Asia, which is on the frontline of climate change yet still highly vulnerable due to low insurance penetration and a wide protection gap. According to the ‘RCP 8.5’ scenario, by 2050, nearly 1bn people in Asia will be living in areas where lethal heatwaves are possible occurrences on an annual basis. Without immediate intervention, these alarming projections will become the reality and generate unprecedented human and economic costs.
For geographical, social and economic reasons, Asia is highly susceptible to the real-world impact of climate change, with limited means available to manifest effective responses that help mitigate climate challenges. Therefore, it is essential to support innovation and scientific research that advances society’s understanding of climate-related risk, and to align insurance solutions with climate objectives to facilitate the long-term sustainable economic growth and development in Asia Pacific.
Allianz’s role in shaping global and regional sustainability initiatives
Since 2005, the Allianz Group Climate Change Strategy has encouraged climate solutions and guided our contributions under the UN Sustainable Development Goals (SDGs) of ‘Affordable and Clean Energy’ and ‘Climate Action’.
As one of the world’s largest insurers and founding member of the Net-Zero Asset Owner Alliance and Net-Zero Insurance Alliance, Allianz recognises the core importance of sustainability.
Allianz Asia Pacific regional CEO Anusha Thavarajah said, “Our strategy and approach are inspired by our mission to ‘secure the future’, to lead as a role model and understand the risks and opportunities that customers, the business and society face. We are on course to become a sustainability shaper of our industry and beyond 2025, delivering full integration of environmental, social, and governance (ESG) aspects in all functions. For instance, Allianz tops Dow Jones Sustainability Index 2021 as leading sustainable insurer.
“In Asia, each of Allianz Asia Pacific’s operating entities have established a sustainability sponsor and sustainability lead, tasked with implementing a comprehensive and localised sustainability plan, analysing emission profiles of our proprietary investments to realise well-defined ESG targets at the regional level as well as at group level.”
Allianz to set the right targets for carbon neutrality in Asia
Allianz is dedicated to supporting clients with solutions to reduce climate-related risks and compensate those who have suffered losses, leading the way and improving the lives of customers through better environmental and sustainability outcomes. Support is also being provided for innovation and scientific research that advance society’s understanding of climate-related risk, and the alignment of insurance solutions with climate objectives to facilitate the region’s long-term sustainable economic growth and development.
On Allianz Asia Pacific’s net-zero targets in Asia, Allianz Asia Pacific regional COO Jon-Paul Jones said, “Within the region, we aspire to build upon global initiatives and commitments to deliver positive impact and outcomes. Our regional operating entities are committed to a 100% transition to renewable energy and 25% reduction in greenhouse gases (GHG) by 2025 in its business operations.
“These ambitious targets will be attained through developing green offices, implementing a hybrid work model, reducing travel and accelerating digital transformation. In 2021, assisted by these initiatives and COVID-19-related restrictions, Allianz Asia Pacific exceeded all environmental targets (energy usage, water, waste, and paper) by a significant margin in most markets it operates in, and is on track to meet the group’s 2025 carbon neutrality target.”
Driving social impact with purpose and transparency
The transition to a net-zero economy and society must account for social conditions since the decisions we make today will shape the lives of the next generation.
Ms Thavarajah said, “In our role as a responsible employer, insurer, investor and corporate citizen, we strive to create climate-resilient communities, engaging and collaborating with all stakeholders to ensure societal adjustments in the process of economic transformation are just and equitable. The Allianz approach to corporate citizenship brings together our ability to mobilise resources to create a meaningful impact with the long-term vision of an inclusive future for local communities and global society. Across the globe and especially in Asia, collaborative efforts are paramount among peers, governments, and civil society to close the protection gap, reaching out to under-served, vulnerable, and low-income populations to provide accessible and essential insurance solutions.”
Responsible and transparent governance is fundamental to creating sustainable value for every stakeholder. The increasing standardisation of disclosures and reporting in the insurance industry, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI), can also help provide more comparable and material sustainability-related data for decision making across the spectrum.
Allianz’s sustainability governance framework is governed by the group ESG board, which takes ownership of sustainability and climate-related topics and associated stakeholder engagement.
Allianz has been working with the global insurance industry convened under the United Nations Principles of Sustainable Insurance (PSI) to publish guidance on analysing the impact of climate scenarios for different types of insurance products. The collaborative efforts continuously enhance Allianz’s reporting and business practices across all markets, enabling increased acceptance and facilitate adoption within Asia’s maturing insurance industry.
Mr Jones said, “Together with the expansive network of local ESG sponsors and leads assigned to all Allianz Asia Pacific operating entities, who are on-the-ground and understand the characteristics of local markets, ensures streamlined ESG integration across all business lines and core processes dealing with insurance and investment decisions. Our strengths in local sustainability governance that account for the properties of each individual market is key to delivering on our ambitions to lead the net-zero transition in Asia and around the globe.”
Keeping up the momentum to deliver positive social impact
Sharing more about Allianz Asia Pacific’s Sustainability priorities for 2022, Ms Thavarajah said, “The momentum of our sustainability strategy will continue across Asia Pacific this year, aligned with, and anchored by, the group sustainability framework. The collective achievements of our operating entities in Asia have elevated our focus on sustainability, with a robust pipeline of sustainable products and services that enable us to serve the evolving risk management needs of our customers.
“With ESG considerations embedded in our business to support sustainable development, we are on track to meet our GHG emissions and renewable energy target and will establish a quantitative roadmap for us to meet the 25% reduction in GHG emissions by 2025 for our insurance investment.
“To deliver on our commitments for better environmental and sustainability outcomes, we are developing global and local partnerships, collaborating with all stakeholders to drive decarbonisation and climate mitigation. The profound changes in the transition to a net zero carbon economy will bring unparalleled opportunities for those ready to lead.” A