Allianz launches first net zero transition plan
The major insurer’s new net zero plan sees footprinting changes and a reassessment of allocation to high emitters.
Andrew Putwainposted on Friday, September 08, 2023
Munich-based insurance giant Allianz has published its first net-zero transition plan with 2030 set as the intermediate target for core business segments.
The global insurer said that the plan would include a long-term strategic commitment to climate – by pledging to achieve net zero emissions by 2050 in its proprietary investment and P&C underwriting portfolios, and by 2030 within its operations function.
In the press release, the company noted that its transition plan included a commitment to achieving 150% profitable growth in revenues from renewable energy and low-carbon technology solutions in the commercial insurance segment by 2030 as well.
Allianz is a laggard in this area. By the end of 2022, 43% of European asset owners had already made public pledges on their net zero targets, according to a Cerulli report on the topic from last year – with 44% of Asian asset owners following suit. The US comes in with a significantly lower 32%. “As they implement measures to achieve this commitment, [asset owners] will increasingly evaluate portfolio-level metrics,” said Cerulli’s report.
“[We’re] already a leading insurer of solar photovoltaic and wind farms, both onshore and offshore,” said Allianz. “Furthermore, [we] aim to provide coverage to the emerging hydrogen technologies,” it continued, seeking to highlight its commitment to sustainability and renewable energy.
“[Given the] extreme weather events, this summer has reinforced the urgency
to act on climate change.”
The insurer planned to “support the ramping up of renewable energy” with its investment portfolio by allocating an additional €20 billion to climate and cleantech solutions – a move aligned with EU sustainability regulations.
This new focus, Allianz said, would build on its previous green energy infrastructure investments, which include wind and solar farms, green hydrogen, and green ammonia. “[Given the] extreme weather events, this summer has reinforced the urgency to act on climate change,” said Oliver Bäte, the company’s CEO.
“We are committed to delivering on our own net zero targets, as well as partnering with our clients and investee companies in their transition,” he continued. “We believe our intermediate targets will help us realise our growth potential. In our operations, we seek to achieve net zero emissions in 70 countries by 31 December 2029.”
The investment changes
The insurer said it planned to achieve these results through efforts that are projected to contribute significantly to a targeted emission intensity reduction of 45% across multiple lines of Allianz’s corporate insurance business, which consists of large company customers that already report their Greenhouse Gas (GHG) emissions.
“[The organisation has] already surpassed previously set 2025 intermediate targets
for its proprietary investment portfolio."
For its retail motor insurance portfolio, Allianz said it would target a reduction of carbon emissions by 30% in nine key European markets by 2030 – including Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Switzerland, and the UK. Whilst these intermediate 2030 targets are the first set for the Allianz P&C insurance portfolio, the organisation said it had “already surpassed previously set 2025 intermediate targets for its proprietary investment portfolio”.
The new goal now halves 2019 emissions by 2030 – with a dedicated focus on actively driving emission reductions in energy, steel, and automobile sectors. The company said it planned an absolute emissions reduction target of -25% from 2019 to 2025 for listed equity and corporate bonds, which had “already been overachieved” last year.
These successes were largely attributed to portfolio re-allocations and “intra-sector shift to lower-emitting companies”. A further -3% change was attributed to “denominator” changes of the carbon footprinting method.
The wider context
Other major insurers are several years into plans to move toward net zero. Last year, fellow German re/insurer Munich Re announced it would stop fossil fuel investments from 2023 on.
The announcement from Allianz comes several months after the organisation joined a large list of major re/insurers that abruptly left the Net Zero Insurance Alliance (NZIA).
Little explanation was given for the departures, and – unlike some others – Allianz made no mention at the time of having an internal net zero framework already in place. For comparison, Zurich Insurance said it could do more on net zero outside the NZIA, and other German re/insurers, such as Munich Re, alluded to potentially conflicting antitrust laws.
Still other major insurers, such as the UK’s Phoenix Group, have long paraded their net zero targets – and many have said it is extremely urgent due to reasons like the Russian invasion of Ukraine, which highlighted a problematic European dependence on Russian oil and gas imports.
Ultimately, the size of Allianz’s investment portfolio – around €750 billion – means that if it chooses to begin investing in new areas there could be far-reaching economic consequences for a host of non-complaint industries and organisations that engage with it.