Debriefing Davos: Resilience and Climate takeaways from WEF

This year’s World Economic Forum (WEF) in Davos grappled with the competing challenges of the climate emergency and building resilience against a tough macro environment, characterised by crises, from social inflation and the cost of living, to geopolitical events such as the war in Ukraine and Europe’s energy shortage.

NZIA launch

This year’s WEF meeting included the launch of a Target-Setting Protocol by the Net-Zero Insurance Alliance (NZIA), convened under the UN Environment Programme’s Finance Initiative.

Under the new protocol, existing NZIA members are required to set and disclose their initial targets by 31 July 2023. The UN called this “an important milestone”.

“The NZIA’s first Target-Setting Protocol is a landmark breakthrough,” said Renaud Guidée, NZIA chair and group chief risk officer, AXA.

“For the first time ever, insurance and reinsurance companies among the largest globally have built a framework and measurement tools to assess the impact of their activities on climate change. The NZIA’s Target-Setting Protocol will serve as a catalyst to set unprecedented and ambitious targets towards net zero,” he added.

The NZIA launched at the 2021 G20 Climate Summit in Venice, co-founded by eight insurers and reinsurers. Since then, the UN said the alliance has grown to 29 insurers and reinsurers, representing about 15% of world premium volume globally.

Under Version 1.0 of the protocol, NZIA members will begin to independently set science-based, intermediate targets for their respective insurance and reinsurance underwriting portfolios in line with a net-zero transition pathway consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100.

The protocol outlines five target types within three target categories (i.e. two types within the emissions reduction category, two within the engagement category and one for the re/insuring the transition category).

Existing NZIA members will be required to set at least one of the five target types by 31 July 2023 and at least one target type in each of the three target categories by 31 July 2024. Those joining the Alliance after January 2023 will have six months to set their first target and one year after that to set a target type in each of the three target categories.

The UN emphasised the role that the insurance industry has to play – as risk managers, insurers and investors – in the transition to a net-zero emissions global economy, by supporting clients in taking action towards net zero.

“Climate change is one of the biggest challenges we face as a global society and re/insurers play their part in the transition to a low carbon economy,” said Thierry Léger, group chief underwriting officer, Swiss Re.

“Setting targets to decarbonise re/insurance portfolios is therefore a crucial step forward, serving as a north star on the path to net zero,” said Léger, whose organisation leads the NZIA Target-Setting Working Group.

The protocol builds on the launch of the first-ever global accounting standard to measure greenhouse gas emissions associated with insurance underwriting portfolios (insurance-associated emissions) developed by the Partnership for Carbon Accounting Financials (PCAF) in collaboration with the NZIA.

“The launch of the protocol signals the move from commitment to implementation,” said Butch Bacani, who leads UNEP’s Principles for Sustainable Insurance Initiative, which created the NZIA last year. 

“Now is the time for insurers to set ambitious and credible science-based decarbonisation targets for their respective insurance portfolios and support a just transition to a net-zero emissions economy to avert climate catastrophe and ensure a sustainable future,” Bacani added.

Click here to listen to more about what the NZIA members said in Davos.

Resilience building

The WEF’s Global Risks Report 2023 (GRR), available to view here, focuses on the importance of building resilience to shocks, such as those that have taken place in recent years, from the Covid-19 pandemic, to the war in Ukraine, inflation, interest rate rises, and crises in living standards and energy shortages.

The report argued for a proactive stance among organisations to build resilience against shocks and sudden crises, particularly by greater use of partnerships and collaborations for governments, industry groups and companies to work together more effectively.

“Indeed, there is still a window to shape a more secure future through more effective preparedness,” the GRR emphasised.

“In addition, leveraging the interconnectivity between global risks can broaden the impact of risk mitigation activities – shoring up resilience in one area can have a multiplier effect on overall preparedness for other related risks.”

McKinsey & Company has published a series of takeaways of its own from the WEF, also emphasising the need to build resilience.

Five takeaways listed by the management consulting firm are as follows:

1. Global disruption isn’t slowing down. Companies must prioritise building resilience muscles today to prepare for tomorrow.
2. No region is an island. The future of globalisation needs diversification rather than decoupling.
3. To achieve a net-zero future, leaders must balance the energy transition and energy resilience.
4. Global companies are finding that inclusion is helping them tap underserved markets, giving them a competitive edge.
5. The budding space economy has vast potential to change the world. Many sectors can capture the innovation of space.

The GRR paper itself added: “Some of the risks described in this year’s report are close to a tipping point. This is the moment to act collectively, decisively and with a long-term lens to shape a pathway to a more positive, inclusive and stable world.”