Is Zurich the most environmentally responsible insurer?
For the first time, Zurich Insurance Group has local sustainability targets, including for Australia and New Zealand. The insurer recently announced new sustainability targets including net zero emissions from all of its operations by 2030 - 20 years earlier than originally planned. Zurich also just won Re/insurer of the Year at the 2022 Sustainable Investment Awards. So how environmentally friendly is Zurich? Sydney based Shaneen Marshall is responsible for the targets in Australia and New Zealand in a new expanded role as head of strategy and sustainability. Marshall gave her first media interview to IBTV.
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Daniel: [00:00:22] Hello and welcome back to Insurance Business TV. I'm Danny Wood, news editor of Insurance Business Australia. Today, we're continuing our look at how insurance companies in Australia are dealing with sustainability challenges. We're joined by Shaneen Marshall, who's taken on an expanded role for the global insurer Zurich in Australia and New Zealand as head of strategy and sustainability. At the same time as Shaneen's appointment, Zurich announced new sustainability targets. Those include reducing the carbon intensity of local investment portfolios by 25% by 2025. Welcome, Shaneen.
Shaneen: [00:00:58] Thanks, Danny. Lovely to be here.
Daniel: [00:01:00] Now you're now head of strategy and sustainability for Zurich. Can you tell us a little about your expanded role and what it means?
Shaneen: [00:01:07] Yeah, sure. And I'm quite proud to be part of Zurich, who takes sustainability so seriously that they willing to make it an executive role and so closely aligned to the strategy. Now we at Zurich want to put sustainability at the heart of what we do, and putting it in the strategy portfolio is quite unusual if you look around the industry and that just shows you how important it is to us and how intertwined it is and in kind of everything that we that we do. Now, I guess my role as sustainability lead, other than having new KPIs, is, is actually leading and overseeing the execution of our commitments. So Zurich globally in 2019 was the first insurer to sign the business ambitions ambition pledge to net 0 to 1.5 degrees sorry, aligned to the Paris Agreement and more recently, the Net-zero Insurance Alliance, which was launched at COP 26. And so that is our commitment to net zero by 2050. And my role is to ensure that we execute on that locally and with Australia and New Zealand. And in my mind that takes on three, three things. Firstly our operations and our value chain and making sure we reduce emissions. Secondly, encouraging our and supporting our customers and our partners on their transition to net zero. And thirdly, which is really important, is also supporting a more resilient Australia and New Zealand as we know, we're going to have to prepare for changes in climate and changes in weather patterns and we need to support the communities in Australia and New Zealand to become more, more resilient. So those are the three aspects that I think are part of my role. But actually it's not just my role. I think it's every person in Zurich's responsibility to to do something about sustainability. And I want to unlock the inner activist in every one of our Zurich employees through through awareness, through education, through inspiration, and through holding everybody accountable to to meeting our commitments.
Daniel: [00:03:14] So what about these new sustainability targets? What do you see as the key change in those?
Shaneen: [00:03:21] So Zurich has had sustainability targets for a very long time globally. And I guess the biggest change globally is that we have accelerated our operations targets. So net zero operations from 2030 from 2015 to 2030. So by 20 years now we've been carbon neutral since 2014, but this is net zero and that's quite, quite a bit further. And we've accelerated our net zero targets to 20 to 2030. Now more locally in Australia and New Zealand. This is the first time we've set local targets and disclosed our local targets so that we and so that's, I guess, the change these local targets include across different areas of our value chain, but reducing our operational emissions by 76% by 20 by the end of 2029. So by 2030, reducing our paper consumption by 70% by 2025, which is soon reducing the emissions in our investment portfolio by 25% by 2025 with the with the view to get net zero by 2050 in our investment portfolio. So those are some of the local targets that we that we've set and we're already well on our way to achieving each of those things. For example, we've procured green power in our, in our New South Wales buildings, reducing our emissions from our operations and down at zero. Our targets for our investment portfolio has has seen us divest in a number of emitters in our investment portfolio.
Daniel: [00:05:01] So, so Zurich, Zurich's aim is to have a carbon neutral portfolio in everything by 2050. Other insurers are divesting completely from coal projects by about 2030 at the latest and scaling back gas. What does being carbon neutral mean? Exactly. And and it sounds like a lot of that neutrality depends on projects that are in the future. Is that does that make it difficult for you to enforce that on your organization?
Shaneen: [00:05:28] So firstly, maybe just explain the difference between carbon neutral and net zero because it's quite a big a big difference. And it's important to to notice when we're looking at the sustainability space. So carbon neutral just means you, you have emissions and you offset your emissions and, and that means you have a carbon neutral portfolio. Net zero is where you have to reduce your emissions to the absolute maximum so you don't have very much emission left and then you remove the remainder of the emission from the atmosphere. So you don't just offset, you actually have to remove that carbon from the atmosphere. So carbon. So net zero is much stronger a commitment than carbon neutral. And, and that's why it's it's an important nuance. So I think in our investment portfolio to say we're going to be net zero by 2050, I haven't seen many commit to that. And that's actually a huge commitment if you look at that. So so that's just that's just an interesting nuance. So around our investment portfolio, we have strict exclusion policies around both our investments and our underwriting. And and those are things like we will not invest or ensure companies that generate more than 30% of their revenue in thermal coal, in extraction of oil and in mining oil shale. We also won't invest in companies that are in new that are in the process of building new developments in those fossil fuels or that have dedicated transportation infrastructure around those those fossil fuels, unless there is a meaningful business transition plan in place. So we have those strict exclusion criteria and that has seen us divest a lot of the a lot of big emitters of fossil fuels since 2017. But at Zurich, we strongly believe that we can have a more significant impact on our customers as well as our investees in our role as an insurer or an investor. In order to promote rethinking and adoption of business models that are aligned to a 1.5 degree future. And the Paris Agreement and an example of that is what Mike Cannon-Brookes has just done with Atlassian. Using your role as an investor in order to make a difference and change the Eagles AGL's future. And so while while we have divested large emitters over and we have strict exclusion criteria, sometimes you actually need to use your influence in order to hold some of these companies accountable to a transition plan.
Daniel: [00:08:07] From what you're saying, it kind of accords with what our insurance insurer, our future rank insurance companies and Zurich does do pretty well and ranked sixth in sixth place out of 30 major insurers and reinsurers. But for your insurance and investment in oil and gas projects, you're drinking falls to about number ten. Can you just highlight again for us, I mean, what progress are you making there and why does your ranking slip four places?
Shaneen: [00:08:36] So, yes, I think I mentioned earlier the strict exclusion policies that we have in place, and that includes oil and gas. And I'm not sure when that when that ranking was done. But if our Investor Day presentation last year in November, we explicitly mentioned some of our progress in oil and gas in oil and gas based. And that's we proactively we committed to proactively engaging our oil and gas customers. We committed to no longer underwriting new greenfields oil exploration projects and not we don't underwrite oil and gas drilling in the Arctic. So alongside our strict exclusion policies, which include oil and gas, we also have committed to doing a number of other things. So that's that was that's the progress that we've made in the oil and gas space. We also recently undertook an accreditation with MSCI. So that's Morgan Stanley Capital International, and that was looking at our ESG and assessing us in that space. And we received a triple A rating, and that is a credible commitment to ESG and the ongoing progress that we're making.
Daniel: [00:09:48] You haven't been in your new job very long, but I'm sure you've been seeing that ESG and all these net zero issues seem to be becoming much more to the fore in recent years. And there's pressure from government, from regulators, from investors that you've mentioned. I mean, where do you see most of that pressure coming from at the moment?
Shaneen: [00:10:08] Well, I think at Zurich, that's not new. I think Mario Greco, our global CEO, said many years ago that we want to be the most responsible and impactful organization in the world. And to me, that's quite a bold, a bold statement. And so the pressure that we that we have at Zurich, it's not really new, but more broadly, we there is definitely pressure coming from investor activism, activism with the rise of both quiet and loud activists. There is public pressure. I think consumer expectations are changing. A recent survey mentioned that 43% of Australians will make climate related decisions. So that shows you the rise in, the rise in in consumer expectations and that could be influenced by the bush fires and by the recent floods that is making climate change more real for for people. And also a big push is reporting frameworks and while I don't always like the stick approach but actually having some the TCFD frameworks and the the new IFAs standards that that are that are currently out for industry comment that's going to force a lot of action around around ESG. And so I would say there's a number of different moving forces at the same time, you know, governments, investors, consumer expectations, reporting, all of those things, culminating in increased pressure.
Daniel: [00:11:39] So what exactly has changed in your sort of financial reporting in the last couple of years? You mentioned those sort of regulatory requirements and standards that are are coming into play more forcefully now. What specifically has changed in how you report what you're doing?
Shaneen: [00:11:57] I think the TCFD frameworks or the Task Force for climate related financial disclosures. That's been around for some time. And New Zealand was actually the first country to mandate disclosure around that policy, followed by Switzerland and the UK. And in 2021, I think the G7 countries committed to mandating that. So that's been around for some time and Zurich has been reporting under the the TCFD framework for some time. We've actually done a lot of work more recently on on this. And one part of that is actually moving the reporting on sustainability to our finance teams, and that's to ensure that we have the right systems and controls around sustainability reporting that we do with our financial reporting, which is actually a big piece of work and a big commitment. We at Zurich, for the first time this year in 2022, have released an integrated sustainability disclosure as part of our annual report. So that's the new the new piece of reporting, and that's where we disclose our performance in line with three frameworks, which is the SASB framework, the WEF, which is the World Economic Forum and Stakeholder Capitalism framework. And in addition to that, some of Zurich's strategic metrics. So that's looking at a number of different frameworks, how they track progress in this space and us reporting against that. So that's incorporated in this new report. And also we've strengthened our TCFD disclosures and in particular around the quantitative scenario analysis around the impacts of climate on our insurance and investment portfolio. And you can imagine how complex that is to actually model out. So so there's there's a lot, a lot happening in that space in terms of looking at the different frameworks as well as strengthening our reporting in this space.
Daniel: [00:13:51] You've mentioned the role of activist investors. And if I could just ask you a little about that, because they do have caused disruptions, but at Lloyd's and at QBE here in Australia and various other places. I mean, what's your general approach to dealing with activist investors and even climate protesters who probably aren't going to be entirely happy with what any insurer is doing?
Shaneen: [00:14:13] I think at Zurich we have we have bold commitments and we and we have set targets in order to meet those commitments. And we ensure that we stick to that, uphold that, and that we work with our clients to do the right thing. And so I think investor activism is good and we believe in our strategy that we've set in order to achieve that.
Daniel: [00:14:36] Do you ever get them in disrupting your meetings or is everyone in Zurich meetings a bit more polite and controlled?
Shaneen: [00:14:43] I haven't I haven't exactly had any any activism disrupt the meeting. We do have, I guess, activists within our business which play an important role to hold us accountable in lots of different aspects, not necessarily just ESG.
Daniel: [00:14:58] You've mentioned some of this already, but in the US, the SEC is bringing in or proposing to bring in some more stringent climate disclosures for companies. If the US does that kind of thing. Is that going to be a big deal or do you feel that Zurich is already doing this kind of stuff and perhaps it's not such an issue for you?
Shaneen: [00:15:20] So I think the latter for us. So we've been doing this for a long time, so it's not such an issue for us, but for for a lot of us companies, I think it might be for a number of reasons. Is that so? The SEC requirements are quite similar to the TCFD framework, which I was mentioning earlier. And I think a little bit of the pressure is actually the time frame on which the SEC expects companies to report. So large companies need to report by 2023 and smaller by 2025. And if you look at the amount of reporting that's required in terms of identifying the risks in your business and doing some scenario analysis to your strategy, your greenhouse gas emissions scope, one, two, and the material scope three. That's a lot of work for someone who hasn't been on this journey for quite a while. So operationally it is complex, but also I think putting it down on paper is the first time. If people haven't done it before, it's the first time you get really real about the challenges and the risks that your business face and the impact that you have on the planet. And that might cause change in itself within a business, but it also will, you know, could ignite board or investor or other activism around around the space. So that that might be interesting and creates some interesting change and even litigation. And also, I guess and this is part of the reason for doing it, there might there is there will be consistency and comparability within investors across SEC listed entities. So the that will allow investors to actually compare and understand the financial risks associated with climate in each of the companies they invest in. And that might force them to make some changes. So it will be interesting. I think it is going to have a big impact on the industry for us at Zurich if we've been doing it for some time and disclosing it as I mentioned earlier. So I don't think it's going to have as much of an impact on us.
Daniel: [00:17:17] From what you've been saying. And according to a lot of a lot of measures, Zurich is doing good work in this space and and and and looks good on its environmental record in a lot of ways. But are you you seem like an optimistic person and you are optimistic about Zurich. But what about the rest of the world? Is all this coming a little bit too late or are you optimistic about the next ten, 15 years? And we have all these natural disasters happening all the time.
Shaneen: [00:17:44] It is too nice, as in we should have acted a long time ago, but that doesn't mean that we can't get there. It is I am an I am an optimistic person. It is going to be complex. It's not going to be easy. It's going to take collaboration that we've never seen before amongst a public private investors, customers systems are going to have to change. And that's hard. It's not going to be easy. And so I am optimistic that we can get there. But it's definitely not going to be easy and it's going to take a lot and a lot of a lot of leaders to lean in from all sectors. So yeah, if we had started and done more a while back, it would have been a bit easier. But it's going to be hard. But I think we can get.
Daniel: [00:18:31] Shaneen Marshall, thanks very much for joining us on insurance business TV.
Shaneen: [00:18:35] Thank you, Danny.
Daniel: [00:18:37] And Shaneen Marshall is head of strategy and sustainability for Zurich in Australia and New Zealand. Thanks for watching.