Industry collaboration will be vital in ‘turning commitment into implementation and achieving real world outcomes - we have no time to lose’, says climate action champion
Lloyd’s of London will be joining the Net-Zero Insurance Alliance (NZIA), convened by the United Nations (UN), in the run up to the 2021 United Nations Climate Change Conference - also known as COP26 - which starts on Sunday 31 October 2021.
By joining the alliance, the Corporation of Lloyd’s, which oversees and supports the Lloyd’s market, has committed to transition all its operational and attributable greenhouse gas emissions to net zero by 2050 at the latest.
This agreement builds on Lloyd’s of London’s pledge to reduce the operational emissions at its landmark building at One Lime Street to net zero before 2025, as stated in its first Environmental, Social and Governance Report, published in December 2020.
Upon joining NZIA, Lloyd’s has set out two further actions:
- Transitioning Lloyd’s of London’s central fund to net zero: The marketplace will do this by redirecting capital flows to green investments that enable and accelerate this transition. Lloyd’s has promised to publish a detailed road map, including interim five year targets, that plots out how the market plans to achieve this goal within 12 months, drawing on best practice from the Net-Zero Asset Owner Alliance. The net assets of this fund totalled £3bn at HY 2021.
- Leading the Lloyd’s market to a net zero underwriting position by 2050: Lloyd’s aims to do this by advocating and supporting all market participants to introduce and implement their own net zero plans. These new expectations will be embedded into the marketplace’s oversight framework.
Lloyd’s chief executive John Neal said: “We are delighted to join the [NZIA] and are fully committed to working collaboratively across the financial sector to achieve its net zero ambition.”
Rebekah Clement, Lloyd’s sustainability director, added: “There is an enormous opportunity for the global insurance industry to step up and support our customers across multiple industries as they transition to a sustainable future.
“In addition to setting out our own commitments to help accelerate this process through the [NZIA], Lloyd’s also has a unique role to play in helping individuals, companies and communities across the world increase their resilience, innovate and transition to a low carbon economy.”
Lloyd’s new regime
By joining the NZIA, convened by the UN Principles for Sustainable Insurance Initiative (PSI), Lloyd’s also becomes part of the Glasgow Financial Allliance for Net Zero (GFANZ).
As part of its action to help save the planet and improve its underwriting status, Lloyd’s will develop a new market-wide Sustainability, Transparency and Reporting Regime, to measure and report on the market’s progress on an aggregate basis in the lead up to 2050.
The measurement framework will be piloted with a select group of MGAs in 2022 before being refined and scaled across the marketplace in 2023.
The regime will also be aligned with and support the ambitions of the NZIA and Partnership for Carbon Accounting Financials (PCAF) to develop a standardised methodology to measure and disclose the greenhouse gas emissions of insurance and reinsurance underwriting portfolios - this aims to help catalyse further action in the sector.
Mark Carney, the UK prime minister’s finance adviser for COP26, said: “It was in the Lloyd’s building that I first called on the financial sector to break the ‘tragedy of the horizon’ and confront climate risk before it was too late.
”I welcome Lloyd’s joining the [NZIA] and the GFANZ. By joining the [alliance], the gold standard for net zero commitments and action, Lloyd’s is demonstrating its commitment to net zero and enabling a more resilient, smooth and rapid transition.”
Nigel Topping, high level climate action champion, added: “Achieving net zero emissions will require transformation across the entire economy. Insurance will be absolutely critical to enabling that transition and to building resilience to climate shocks.
”I welcome the ambition from Lloyd’s in leading the Lloyd’s marketplace to a net zero underwriting position by using [its] influence with market participants to full effect. Industry collaboration will also be essential to turning commitment into implementation and achieving real world outcomes. We have no time to lose.”