Withdrawals from Net-Zero Alliances
Recently, several major insurers and asset owners, including at least eight APAC-based companies, have publicly withdrawn their membership from various Net-Zero Alliances.
In the Law:
The Net-Zero Insurance Alliance (“NZIA”) was launched by the United Nations in 2021 in a proactive move to address climate change risks. This collaborative initiative aided in uniting insurance companies committed to achieving net-zero greenhouse gas emissions in their underwriting and investments, leveraging their influence and resources to support a sustainable future.
These initiatives are not legislative but gained significant global buy-in when they were developed.
In the Company Boardroom:
Even though some companies have withdrawn from these Alliances, there are still many that remain. Some of these companies are citing ‘anti-trust’ risk as a reason for their stepping away. Whilst the removal from these Alliances is disappointing from a collective action perspective, as long as their decarbonisation targets still exist the overall effect could be minimal.
In fact, according to Refinitiv, in Q2 2023 over 300 new APAC companies committed to net-zero or similar targets, compared to just 45 in 2021. These actions align perfectly with increased local regulatory expectations from ISSB and Treasury over the past few months.
In the Investment Houses:
When seeing a large insurer or bank withdraw from such a positive collective action group, it does make the investment houses question: Is decarbonisation too difficult? Is it non-economic for the company? What do these companies think that differs to those who remain?
The investment houses who position themselves as more activist may engage formally with the insurers or banks who have withdrawn. Depending on the progression of this engagement, formal escalation processes may be initiated. This may then become a matter of considerable public interest, resulting in divestment and may even prompt other investment houses to also reconsider their positions in response.
Our View:
We love seeing industry-level global collective action on climate change. It gives us hope that powerful industries like insurance and banking are working together to help mitigate such a global issue. When companies step away from these groups, we can only hope that they will not also reduce their public decarbonisation commitments.
However, it does highlight how difficult the challenge is ahead of us. We feel that as long as policy support for decarbonisation remains, alongside company commitments, improvement can be achieved. Maybe it will take a little longer to get to our sustainable future though…
For additional information on this important topic or ESG assistance, contact us today at info@anabranchesg.com.au
