European insurers and reinsurers are stepping up their coal policy and are not renewing certain contracts with companies considered too impactful or too slow to adopt an energy transition.

According to Bloomberg, insurance company AXA intends to abandon its client RWE AG over concerns in regards to the coal operations of this European energy giant, and its measures considered too slow to reduce its carbon footprint.

RWE is one of the largest coal mine operators in Europe and is said to be one of the largest emitters of greenhouse gases. The company is committed to becoming a carbon neutral company by 2040, with climate targets that a group of climatologists say are in line with the goals of the Paris Agreement on climate change. However, the French insurer would plan to sever all its links with RWE by the end of 2022 and would even refuse to insure its renewable projects.

Axa, was the first insurer to impose coal-related underwriting restrictions, and ceased insuring coal mines and power plants at the end of 2020 after a two-year grace period expired. The insurer’s internal policy prohibits to providing insurance to companies that produce more than 20 million tonnes of coal per year. However, the statements of the company RWE showed that it had extracted 65 million tonnes of coal in 2020.

More than 20 insurers and reinsurers have adopted coal policies, but after the Coal Policy Tool – which assesses and compares the policies adopted by all financial actors on coal – only AXA would have announced a robust exit policy from the sector aligned with a 1.5 ° C objective.

The last ReclaimFinance article indicates that of the 4 large global reinsurers with a coal policy such as Swiss Re, Munich Re, Hannover Re and SCOR, Swiss Re is the only company to have made the commitment to apply its policy to reinsurance from 2023.

Swiss Re this week announced new measures to support the transition to a net zero economy, encompassing both asset management and underwriting as well as its own operations.

«Climate change remains the biggest challenge we face as a society. The stakes are high and require immediate attention. Signing up to net-zero emissions by 2050 and setting concrete climate targets are important first steps. What needs to follow now is action. We are moving ahead in all areas of our business to accelerate the transition towards net zero. »

Christian Mumenthaler, Swiss Re’s Group Chief Executive Officer

According to the Production Gap Report, hydrocarbon production is expected to decline 6% per year by 2030. In this perspective, the Insure Our Future network wrote in early March to ten of the largest international reinsurance companies, including Munich Re, Hannover Re, SCOR, Berkshire Hathaway, Lloyd’s of London, MAPFRE and Vienna Insurance Group, asking them to take measures to exclude coal from their treaties.

The carbon reduction targets set by Swiss Re are ambitious and defined in accordance with the scientific advice of 1.5 ° C and the Net-Zero Asset Owner Alliance Target Setting Protocol.

  • 025 carbon intensity reduction target of 35% for corporate bond and listed equity portfolio; direct real estate portfolio already ahead of 1.5°C pathway by 2025.
  • Long-term objective to exit coal-based assets for the portfolio by 2030.
  • Swiss Re will systematically engage with portfolio companies on developing climate strategies as part of a broader engagement framework.
  • Target to increase investments in renewable and social infrastructure by USD 750 million. In addition, target to expand green, social and sustainability bond exposure to USD 4 billion by the end of 2024 (from USD 2.6 billion at end of 2020).

The ambitious targets build on the already substantial decrease of the carbon intensities in Swiss Re’s corporate bond and listed equity portfolio of around 30% between 2015 and 2018

AXA and Allianz, also members of the Net-Zero Asset Owner Alliance have similarly adopted targets for reducing CO2 emissions linked to their portfolio by 2025, but the metrics used still lacking homogeneity ; as such it is impossible up today to compare them.

Article: Joana Foglia