ABI Climate Change Roadmap reveals potential for near-£1trn green investment

The Association of British Insurers (ABI) has unveiled its Climate Change Roadmap for the insurance and long-term savings industry.

The roadmap, developed in partnership Boston Consulting Group, detailed that a potential £900bn could be made available by the industry between now and 2035 to invest in meeting net-zero targets.

This represents £60bn a year, and could potentially contribute one third of the £2.7trn investment needed to meet the UK’s net-zero target, according to the roadmap.

However, the firms said that this would require “significant” regulatory and market reform to enable such a level of investment, urging the government and regulators to rethink how investment is incentivised and allow ABI members to allocate a greater proportion of their investment capacity to climate transition opportunities.

Ten insurance and long-term savings firms, that have over £1.25trn in invested assets, came together to write the roadmap, which detailed targets and proposals for the industry to fully decarbonise by 2050.

Those firms were: Pheonix, Aviva, M&G, Direct Line Group, Lloyds Banking Group, Royal London, Bupa, Pension Insurance Corporation, Rothesay and Zurich.

The roadmap stated that, by 2025, firms should have worked with recognised external frameworks to set targets to reach net zero by 2050, reduced their greenhouse gas emissions by 50 per cent by 2030, and fully decarbonise by 2050.

It also outlines how it will make it easier for customers to make sustainable choices with their pension savings through communication and engagement.

Commenting on the announcement, UK Energy and Climate Change Minister, Anne-Marie Trevelyan, said: “We are at a pivotal moment for our planet, and the ABI is showing how protecting the environment and supporting economic growth go hand in hand.
“Today’s ambitious plan for the insurance and savings sector, including the potential to invest nearly £1trn to help the UK reach net-zero carbon emissions by 2050, will be critical alongside actions by this government and the public to tackle climate change.”

UN Special Envoy on Climate Action and the Prime Minister’s finance adviser for COP26, Mark Carney, added: “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 this way, the roadmap is a valuable contribution to this process to ensure that every professional financial decision takes climate change into account.”

ABI director general, Huw Evans, concluded: “Trade associations like the ABI have a critical role to play in enabling leading firms to work together to tackle this unprecedented challenge. I’m proud of the tireless effort from the ABI and its members to develop this roadmap which will help all insurance and long-term savings companies understand what they need to do to help us meet net-zero targets.

“Today’s roadmap will ensure we take decisive steps so that our sector is big part of the solution not the problem.

“Critical to our sector playing its full part are reforms to our prudential regulation regime and public policy. If we truly want the weight of insurers’ balance sheets to get behind the race to net zero, it will require meaningful change, not staying anchored to an overly-restrictive regime designed in the immediate aftermath of the financial crisis.”

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