Leading insurers and long-term saving firms say they could potentially make nearly £900billion – or £60billion a year – available from now until 2035 to invest in meeting net zero targets.

Ten companies have come together to release a Climate Change Roadmap, issued by the Association of British Insurers, which sets out the role the sector can play in tackling environmental issues.

Proposals include switching customers to an electric vehicle after a car is written off and having a broken gas boiler replaced with a sustainable alternative.

The roadmap says insurers also intend to explore how firms can encourage customers to accept repaired or recycled items as part of a settlement, rather than offering brand-new items.

Green: Moving customers onto electric vehicles after they write off their car is a new proposal

Green: Moving customers onto electric vehicles after they write off their car is a new proposal

Green: Moving customers onto electric vehicles after they write off their car is a new proposal

What does the roadmap suggest?  

As set out in the UK Climate Change Committee’s ‘Sixth Carbon Budget’, an estimated £2.7trillion of investment is needed over 2021 to 2035 to hit the Government’s Net Zero target. 

ABI members could invest up to £900billion in UK transition opportunities over that time frame – equivalent to £60billion per year or a third of the money needed to meet the UK’s net zero target – according to new independent analysis conducted by Boston Consulting Group.

Currently, the sector employs 310,000 people around the UK, manages £1.6trillion in invested assets and handles £46million in claims every day. 

However, this will require significant regulatory and market reform in order for insurers to be able to deliver such a level of investment. 

It adds that, by 2025, insurers and long term saving firms, such as pension companies, should have set a target to show how each one plans to reach Net Zero by 2050 and fully decarbonised their activities in line with the UN Paris Agreement.

They have also pledged that, by 2030, they will have reached the goal of a 50 per cent reduction in Greenhouse Gas emissions.

Ten ABI member firms have been directly involved in developing the roadmap and are already fully committed to these targets.

These include Phoenix, Aviva, M&G, Lloyds Banking Group, Rothesay, PIC, Zurich, Bupa Insurance Ltd, Direct Line Group and Royal London.

Changes could include having a broken gas boiler replaced with a sustainable alternative

Changes could include having a broken gas boiler replaced with a sustainable alternative

Changes could include having a broken gas boiler replaced with a sustainable alternative

How will the changes affect customers? 

The roadmap is aiming to make it easier for customers to make sustainable choices about their pension savings by providing clear and consistent information.

It is also identifying moments where sustainable choices could be encouraged and developing a ‘jargon-buster’ so savers understand how climate change issues relate to their pensions.

The industry also wants to help customers to make sustainable choices during the claims process.

The ABI said it will work with members and engage with its counterparts in other economic sectors to define what would be required to enable customers to take sustainable choices while resolving claims – focusing in particular on motor and property claims in the first instance.

This could mean switching to an electric vehicle after a car is ‘written off’ or having a broken gas boiler replaced with a sustainable alternative.

It will also explore how firms can encourage customers to accept repaired or recycled items as part of a settlement, rather than offering brand-new items.

As part of this, it will look at how items damaged during a flood or storm can be reclaimed and given to organisations who can re-use or repair them.

What other changes does it suggest? 

Other steps include partnering with the independent healthcare sector to develop safe alternatives to single-use plastic and other unsustainable items in hospitals and healthcare.

Firms will also encourage the development of a sustainable secondary market for electric vehicles and establish consistent practice for re-using and recycling charging equipment.

Mark Carney, Prime Minister’s finance adviser for COP26, said: ‘To achieve net zero we need a whole economy transition – every company, bank, insurer and investor will have to adjust their business models, develop credible plans for the transition and implement them.

‘As insurers commit to transition their underwriting activities to net zero through the soon-to-launch Net Zero Insurance Alliance, they will need the right tools and guidance to help them on this journey.

‘ABI’s Climate Change Roadmap highlights the need for near term milestones on the transition to net zero, the business and investment opportunity from the transition for UK insurers and the need for supportive public policy measures.’

In addition, a number of other ABI Board firms have contributed to shaping the commitments in the roadmap and have set Net Zero milestones. 

One step includes joining with the healthcare sector to develop alternatives to single-use plastic

One step includes joining with the healthcare sector to develop alternatives to single-use plastic

One step includes partnering with the independent healthcare sector to develop safe alternatives to single-use plastic

What changes will the Government need to make? 

In order to give the investment, the firms have said the UK Government would need to consider making changes to the industry’s regulatory regime, Solvency II.

This sets out regulatory requirements for insurance firms and groups, covering financial resources, governance and accountability, risk assessment and management, supervision, reporting and public disclosure. 

Charlotte Clark, director of regulation at Association of British Insurers, said: ‘Solvency II reform will be key in increasing UK competitiveness, driving investment in the green economy and supporting economic growth across the UK.  

‘This will make it much easier for our world leading insurance and long-term savings sector to invest in long-term assets, and make more effective use of capital.’ 

It added collaboration is needed between the UK Infrastructure Bank and the Prudential Regulation Authority to ensure the investment opportunities are not then disincentivised through the regulatory regime.   

The ABI said the plan will be reviewed each year to ensure it remains consistent with scientific evidence, it continues to reflect the UK Government’s Net Zero strategy and any international agreements made at COP26, and also the outputs of the recently launched Taskforce for Nature-related Financial disclosure.

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Source: | This article originally belongs to Dailymail.co.uk

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