The Insurance Council of Australia (ICA) has released the third edition of its "Climate Change Roadmap", which includes member survey results showing that 85% of respondents have set net-zero targets by 2050, with 50% aiming for 2030 operational net-zero targets.
The Insurance Council of Australia (ICA) has released the third edition of its “Climate Change Roadmap”, which includes member survey results showing that 85% of respondents have set net-zero targets by 2050, with 50% aiming for 2030 operational net-zero targets.
The 2024 update of the “Climate Change Roadmap—Towards a Net-Zero and Resilient Future”, also found that 63% have linked climate metrics to executive pay.
Other findings are:
- 30% of respondents set public net-zero targets for their claims supply chain, with an additional 30% planning to set targets in the next year. More than 50% of respondents are actively engaging with their supply chains to encourage emission reductions efforts, which is essential as mandatory climate disclosure approaches. A lack of consistent methodology by which to measure and then abate emissions across insurers’ claims supply chain remains a key challenge; however, a number of respondents noted the value of the work the Insurance Council is progressing in this space.
- 40% of respondents have set net-zero targets for underwriting portfolios. Feedback indicated that significant barriers persist in this area, such as the absence of established methodologies. However, more than 50% of respondents are actively working on reducing emissions in their underwriting portfolios, by exploring new products and technologies, and assisting emissions-intensive clients with decarbonisation strategies.
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45% of respondents have set net-zero targets for investment portfolios with an additional 10% of respondents planning to set targets in the next year. One-third of respondents are waiting for guidance from the market and/or regulation before setting additional net-zero emissions targets across their investment portfolios. Challenges include investment time horizons, capital requirements and methodologies across key asset classes. 65% of respondents are incorporating climate considerations into investment decisions and almost half of respondents highlighted a shift away from investments in carbon-intensive activities (e.g., coal, gas, oil).
Barriers to net-zero targets
The primary barriers to setting net-zero targets were identified as ensuring business alignment (29%) and establishing methodologies for measuring and tracking emissions (29%). Additionally, there is a need for education and awareness across all organisational levels to foster understanding and commitment. Over half of respondents indicated that a lack of internal expertise in formulating net-zero targets is a key obstacle in the short to medium term.
Mandatory climate disclosure
The roadmap highlights steps the industry has taken to prepare for mandatory climate disclosure requirements that are coming into force nationally for most major Australian businesses in early 2025. More than half of survey respondents have already been subject to these requirements in other jurisdictions.
In preparation for reporting, 31% of respondents are considering other material issues like nature, and one in five respondents are also preparing to disclose social and governance issues under the EU’s Corporate Sustainability Reporting Directive (CSRD). Looking ahead, key guidance sought by general insurers includes transition planning, climate scenario analysis and GHG reporting methodology for scope 3 emissions. 56% of respondents also indicated that there was an opportunity to engage further at the board level on net-zero strategies and transition risk.
Mr Andrew Hall, ICA CEO, said, “ The insurance industry is the financial shock absorber of the impacts of extreme weather events, which is expected to cost Australia A$35.2bn ($22.6bn) a year by 2050. Extreme weather events are costing Australian homeowners approximately A$4bn a year, highlighting the need for greater action to future proof Australia’s resilience in the face of worsening bushfires, cyclones and floods.”
Survey
The ICA has more than 50 members representing 89% of total premium income written by private sector general insurers, spanning both insurers and reinsurers. Each year the Insurance Council surveys a randomised and anonymised cross-section of ICA members, to build a point-in-time snapshot of the ambition and roadblocks on the road to net-zero. The pool of member responses involved in the survey this year was the Insurance Council’s largest to date, representing a total of more than A$5bn in annual GWP.
The ICA’s landmark “Climate Change Roadmap—Towards a Net-Zero and Resilient Future” report was first launched in November 2022 and provides a framework for insurers to achieve net–zero by 2030 for their operations, and work towards achieving net zero across their investments, supply chain and underwriting no later than 2050. The roadmap is updated annually to ensure it reflects the latest insights on climate action for the general insurance sector. The report was written by Boston Consulting Group in consultation with ICA members.