Insurers have a huge role to play in sustainability – AXA Asia & Africa CEO | Insurance Business Asia
While presently overshadowed by the COVID-19 pandemic, the climate crisis remains the largest and most pressing issue faced by the world today. Humans have already felt significant effects in the form of more frequent and stronger extreme weather events, and the scientific community says these effects could become even worse if global warming remains unchecked.
Like many other industries, insurance has an important role in mitigating the crisis.
“Global warming is a pressing issue we cannot ignore, and insurers certainly have an important role to play in addressing it,” AXA Asia & Africa CEO Gordon Watson told Insurance Business. “This requires a comprehensive approach that spans every aspect of our business, which for AXA takes the form of re-orienting our portfolio toward green investments, developing insurance solutions that promote sustainable behaviours while supporting vulnerable communities, and greening our operations to reduce our carbon footprint.”
According to Watson, AXA is one of the pioneers in putting climate on top of the insurance industry agenda through its climate leadership commitment, centred on raising awareness of climate issues, managing risk and developing products and services to help create a more sustainable society.
“In this spirit, AXA took the lead in calling for the creation of the Net Zero Insurance Alliance,” Watson said. “By gathering peers who share our commitment to turning our core business – underwriting – into a driver for transformation towards carbon neutrality and action against global warming, we expect that the Net Zero Insurance Alliance can deliver tools that will set new reference points for climate-responsible insurance portfolios.”
In 2019, AXA announced a plan to cut its ties with the coal mining industry. According to Watson, while the list of actions needed to meet climate objectives remains long, varied and urgent, coal is a key priority, as it is the largest single source of global warming.
“Apart from adopting a coal divestment strategy starting from 2017, AXA also strengthened its policies to restrict the underwriting of coal-based power-generation assets,” Watson said. “In addition, the group has made a commitment to a long-term coal exit strategy, which aims to reduce its exposure to the thermal coal industry to zero by 2030 in the European Union and OECD countries, and by 2040 in the rest of the world.”
Aside from divesting from the coal industry, Watson also shared several other initiatives AXA has taken to become a more sustainable business, with a major goal of aligning its investments with the Paris Agreement, committing to a 1.5°C warming potential by 2050.
”As of December 2020, AXA’s green investments reached €16.1 billion, with a target of reaching €25 billion by 2023,” Watson said. “AXA also set new standards for climate finance by establishing a Sustainability Bond Framework and launching our first green bonds in April 2021.”
The company also developed so-called “transition bonds” in 2019. According to Watson, these bonds support companies that are actively de-carbonising but have not reached the level of “green” to warrant a green bond. Since then, AXA has launched around €200 million in transition bonds.
In October, AXA announced new commitments to preserve biodiversity, with plans to invest €1.5 billion to support sustainable forest management, including €500 million in reforestation projects in emerging countries, which will translate to 25 megatons of CO2 captured annually, once completed. AXA also strengthened its investment and insurance requirements in activities that actively contribute to deforestation.
“This mind-set is being further integrated into the products we provide to customers,” Watson said. “For example, our AXA Mileage Driver Insurance in Korea offers typical motor insurance as well as discounts on premiums according to the annual mileage driven, while in Hong Kong, our SmartHome Plus policy not only protects people from damage caused by a typhoon or a black rainstorm but covers ‘build back better’ repairs. Across Asia, we also continue to ramp up the use of digital tools and processing methods to eliminate paper waste. As a group, we are committed to reducing our CO2 emissions by 20% between 2019 and 2025. We have a concrete plan to do this by reducing the amount of energy we use to light, heat or cool our buildings, and reducing our business air and car travel, and greening our operations more broadly. I believe the majority of employees around the world are also ready to do their part on climate change.”
Watson believes that the entire insurance industry must work together and take a united stand against human-caused climate change.
“We believe that cooperation and joint efforts are essential to addressing related challenges and building better solutions for the future,” he said. “We also support work as part of the Task Force on Climate related Financial Disclosures (TCFD).”
AXA was among the 22 global insurers and reinsurers that worked with the United Nations Environment Programme to develop the first comprehensive guidance for the insurance industry to identify and disclose the impact of climate change on their businesses.
“This report represents the largest collaborative effort by market participants to pilot some of the most challenging recommendations of TCFD and set out four principles that insurers and reinsurers should adhere to,” Watson said. “This includes embedding relevant ESG issues into business decision-making, working with clients and partners to manage ESG risk and develop solutions, collaborate with governments and other stakeholders to promote action, and demonstrating accountability and transparency in our progress on implementation.”