Methodology for climate alignment of insurance activities and consistency with prudential regulations

Scientific project

The Net-Zero Insurance Alliance (NZIA), convened by the United Nations, is a group of over 20 leading insurers representing over 11% of global premium volume. NZIA members have committed to moving their insurance and reinsurance underwriting portfolios towards a Net Zero economy by 2050, within a maximum temperature increase of 1.5°C above pre-industrial levels by 2100. This ensures the implementation of the Paris Agreement on climate change.

In this context, insurers are called upon to calculate the alignment of their portfolios and establish targets and actions to incorporate activities compatible with a Net Zero economy. Many methodologies exist for the alignment of investment portfolios, but those for insurance portfolios are still under development. Hence the need for a research programme to create methodologies for calculating the alignment of such a portfolio, focusing on two sectors (automobiles and agriculture).

The sectors traditionally treated in alignment studies are those related to energy and industry. The scenarios often used for these studies in these sectors are those developed by the IEA. The agricultural sector has received less attention so far, even though it is responsible for a significant part of global emissions. This is partly due to the complexity of dealing with emissions from this sector. Work is beginning to emerge on aligning the agricultural sector, but the subject is not yet mature. France has developed climate scenarios for this sector within the framework of the SNBC (National Low Carbon Strategy) and via Ademe, which is working on sectoral transition plans. This work will serve as a basis for the studies and methodological developments carried out in this project.

A specific focus will be placed on the subject of carbon capture in the agricultural sector. The agricultural sector has the specificity of being a carbon sequesterer by nature. This specificity is not necessarily well taken into account in general alignment methodologies. This project aims to propose methodological adaptations to integrate this factor into the insurance framework for activities in the agricultural sector.

Other prospective research topics will be addressed in the framework of this project:

– The Crédit Agricole Group and its various subsidiaries have joined the various Net Zero initiatives (NZBA for banks, NZAOA for asset managers, etc.). Pacifica (via CAA) has joined the NZIA and it is necessary to ensure consistency between the respective commitments and methodologies used by the group’s entities within the framework of these different alliances. A comparison of methodologies will therefore be conducted between these different entities to highlight.