LONDON (Reuters) – Lloyd’s of London said on Thursday it would join peers in scaling up efforts to cut carbon emissions and push members of the commercial insurance market to do the same, days before international climate talks get underway in Scotland.
Lloyd’s has long been seen as a laggard on climate action, leaving decisions on whether to underwrite activities in a range of heavy-emitting sectors to its 100-odd syndicate members amid sharp criticism from activists.
As pressure builds on financial companies to act on climate, Lloyd’s said it had joined the United Nations-convened Net Zero Insurance Alliance (NZIA), a body aiming to reduce the sector’s emissions and help cap global warming.
By joining, Lloyd’s said it was committing to moving all of its operational and attributable greenhouse gas emissions to net zero by 2050 at the latest. It will also set, publish and report against interim science-based targets every five years to ensure action in the near term.
Part of that effort would see it move its 3 billion-pound ($4.12 billion) Central Fund, which backstops members’ liabilities, to net zero by switching to green investments.
“(We) are fully committed to working collaboratively across the financial sector to achieve its net zero ambition,” Lloyd’s Chief Executive John Neal said in a statement.
On the more contentious issue of its members’ activities, Lloyd’s last week wrote a ‘Dear CEO’ letter to its insurers to warn them they would need to come up with an environmental, social and governance plan in the second half of 2022.
This follows the launch of Lloyd’s’ own inaugural ESG strategy last year, years behind many of the top European insurers and reinsurers.
“Lloyd’s will advocate and support all market participants to introduce and implement their own net zero plans in order to reach a net zero underwriting position for the market by 2050 at the latest,” it said in the statement.
“These new formal expectations will be embedded into the Lloyd’s market oversight framework, putting climate action at the heart of annual business planning cycles with syndicates.”
Lloyd’s members’ ESG commitments would form a key part of the risk assessment process when Lloyd’s signs off their annual business plans for 2023, it said, which in turn can affect the members’ ability to write business in the market.
“Achieving net-zero emissions will require transformation across the entire economy,” said Nigel Topping, UN High-level Climate Action Champion at the COP26 climate talks starting in Glasgow on Sunday.
“Insurance will be absolutely critical to enabling that transition and to building resilience to climate shocks.
“I welcome the ambition from Lloyd’s in leading the Lloyd’s marketplace to a net zero underwriting position by using their influence with market participants to full effect.”
($1 = 0.7288 pounds)
(Reporting by Simon Jessop and Carolyn Cohn; Editing by Steve Orlofsky)