The launch of the Insurance Council of Australia (ICA) Climate Change Roadmap marks a step-change in the industry’s approach to one of the defining issues of our time.
As reported by insuranceNEWS.com.au last week, the roadmap outlines pathways for insurers to achieve net zero emissions for their operations by 2030 and across underwriting, claims supply chains and investment decisions by no later than 2050.
“Supporting a net-zero transition will help to ensure insurance remains affordable and accessible for all Australians,” ICA President and IAG CEO Nick Hawkins says.
“To achieve the climate change goals set out in international agreements to which Australia is a signatory, urgent and significant reductions in emissions are required across all sectors of the economy, and this includes insurance.”
Some will argue that’s obvious, and has been for some time, and that the action outlined in the roadmap is too little too late.
“Seven years after the signing of the Paris Agreement on global warming the ICA has finally released a net zero emissions roadmap,” Market Forces campaigner Pablo Brait told insuranceNEWS.com.au.
“However, with insurers being given until 2024 to set targets, there is a concern that it is further delaying the urgent action that we’ve known for years insurers need to take.
“According to the International Energy Agency the net zero emissions by 2050 target requires no new coal, oil or gas projects to be built. This is a fact that is missing from the ICA’s roadmap.
“Any net zero by 2050 roadmap that doesn’t include an immediate end to the underwriting of and investment in new fossil fuel projects and companies building and planning new fossil fuel projects is not credible.”
But even the most hardened climate campaigners should be able to see that the roadmap is a major step forwards in terms of Australian insurers’ recognition of the threat, and the need to rapidly reduce carbon emissions.
A decade ago, the local industry was barely willing to discuss climate change at all, arguing that with its reliance on past data, and the ability to adjust risk exposure and pricing on an annual basis, it didn’t need to worry about future predictions that may or may not come to pass.
There was a shift in 2016, with then ICA president Andy Cornish accepting that the industry had “not been very vocal” on the issue and declaring: “I think we can use the words climate change now.”
But for several years afterwards, the industry was focused purely on mitigation measures required to address the impact of climate change, and declined to engage on the matter of carbon emissions reduction.
This was partly to avoid upsetting the government of the day, and partly to avoid upsetting industry participants who did not (some still do not) believe that man-made climate change is real.
Former ICA CEO Rob Whelan said as he stepped down in 2020 that not taking a “stronger stance” was one of his greatest regrets.
“It’s a delicate balance with the political environment that you are working with because there were very strong views within government at various times that this was not an issue and that we needed to keep out of it,” he said.
“While we always maintained the view that [climate change] is an important material risk, the extent to which we could be vocal about this was somewhat limited. I would like to have done more, and taken a stronger stance.”
Of course, there is now a new Federal Government, new leadership at ICA, and a renewed sense of urgency following a recent run of brutal natural catastrophes.
A “stronger stance” has now been taken, and not everyone is as pessimistic about the roadmap as Market Forces.
Finity Principal Climate & Sustainability Risk Sharanjit Paddam – ANZIIF Insurance Leader of the Year –says there is “much to admire” and picks out three points.
“First, that Australia’s insurance industry is leading the way – thanks I think to a greatly invigorated executive team.
“Second, the roadmap includes Scope 3 emissions, which recognises the role that insurance has always had in providing the foundation for economic activity, but updates it to lead the transition our economy needs for the future.
“Third, the roadmap, backed by major insurers, is not just an aspirational target, but a deeply considered and concrete plan to drive decarbonisation across the economy.”
The major Australian insurers have been eager to make known their support of the new roadmap.
insuranceNEWS.com.au understands that there is a list of signatories, but that this remains secret. It might be more interesting to see who isn’t on that list, rather than who is – but apparently all the majors are there.
Whatever the industry has or hasn’t said in the past, its messaging on climate change now looks to strike a very different tone.
And while more action might still be required, it’s undeniably progress.
Read the ICA’s roadmap here.