Swiss Re

Sector: Corporate

Carbon Footprint:

> 45,836 metric tonnes CO₂e (2004)

TARGETS

> To reduce operational greenhouse gas emissions by 15% against 2002 levels by 2013
> To become fully greenhouse gas neutral over the next 10 years
> Development of greenhouse gas emissions reduction insurance and investment products, renewable insurance and financial structuring products

Achievements

> Holistic assessment of climate change related risks and opportunities across all major business units
> Communication of these risks and opportunities to a range of financial service providers

Benefits

> New product opportunities
> Risk management of anticipated insurance and investment related losses

Low Carbon Solutions

Background

Swiss Re is the world’s second largest global reinsurer with more than 70 offices in 30 countries. As well as reinsurance, the company provides a range of other financial and insurance products to many Fortune 2000 companies through its three major business divisions: property-casualty; life and health; and financial services. 

Communicating the issues surrounding climate change is at the heart of the Swiss Re strategy. The company is actively involved in lobbying for strong public policies to combat climate change. It participates in the Carbon Disclosure Project and is a member of the International Emissions Trading Association and the Climate Change Working Group of the United Nations Environment Programme Finance Initiative (UNEP FI). It also played a leading role in launching the UNEP Insurance Industry Initiative. 

Swiss Re produced its first climate change risk publication over 10 years ago, which was initially greeted with some skepticism as the world of finance is traditionally very short-term.

In 2000, after a six month group-wide feasibility study, the Greenhouse Gas Risk Solutions (GHGRS) unit was formed. Its aim is to mitigate and manage risk, develop solutions, facilitate opportunities around global climate change issues, develop new business and work closely with the three major business divisions to help them identify risks and opportunities in their work. In this way climate change has permeated throughout the company.

The impacts of climate change have significant direct implications for Swiss Re. For example, more frequent flooding and changing disease vectors potentially alter the risk profile in terms of property and life insurance respectively. Swiss Re has responded strategically to the increase in frequency and severity of natural disasters and uses a series of models, scenario tools and rating tools to assess the risks associated with climate change.

One specific insurance product where Swiss Re has identified a possible impact is directors and officers liability, which provides cover against financial loss claims made against members of the board of directors, executive boards and other employees. Potentially, if companies were financially affected as a result of emissions reduction issues or climate impacts, directors and officers may face legal action. Swiss Re has therefore introduced questions on climate change in renewals notices for its directors and officers liability policies. Ultimately, these answers will be factored into levels of cover and costs of premium, serving as an educational function and potentially acting as an incentive for positive change within client companies – as well as mitigating risk for Swiss Re.

Swiss Re is also looking to secure first-mover advantage in a number of areas across the company. For example, the unit is currently looking at creating a $250 million investment fund for energy efficiency and renewable energy in Europe. Swiss Re will act as the asset manager and as a conduit for other companies to invest.

The company is also developing insurance products that facilitate emissions trading. Swiss Re’s role will be as a financial intermediary, standing between the buyer and seller, insuring cash delivery to the buyer upon seller non-delivery. Another area of innovation is in providing insurance for renewables projects. The company recently underwrote its first wind farm off the Welsh coast. As more wind farms go offshore, becoming larger and more costly, the demand for insurance products is expected to increase because of the large amounts of money at risk.

Swiss Re is complementing its business activities with an internal emissions reduction programme. In October 2003, the company announced plans to become greenhouse gas neutral over the following ten years. To help achieve this goal Swiss Re introduced a target to reduce its emissions by 15%, on top of a 10% reduction already achieved between 1999 and 2001.

Swiss Re initiated a ten-year investment in the World Bank Community Development Carbon Fund to offset the expected remaining 85% of emissions. The company will re-evaluate its position in 2013, calculating actual emissions against the offsets with any shortfall being compensated from the market.

Swiss Re’s new ‘gherkin’ building in The City of London. The company has committed to reduce in-house emissions of greenhouse gases by 15% by 2013, and to offset those emissions remaining, the goal being to become carbon neutral over the course of the next 10 years.