The FINANCIAL — Swiss Re starts the implementation of its thermal coal policy announced in June 2017. Under the coal policy, Swiss Re will not provide re/insurance to businesses with more than 30% exposure to thermal coal across all lines of business. It is a further step in refining Swiss Re’s approach to managing carbon-related sustainability risks and supporting the transition to a low-carbon economy.
The decision to develop a thermal coal policy was based on Swiss Re’s commitment to the “Paris Pledge for Action“ in 2015, when Swiss Re affirmed its strong commitment to the effort to limit global warming to 1.5°C – 2°C above pre-industrial levels. As a result, Swiss Re supports a progressive and structured shift away from fossil fuels.
Edi Schmid, Swiss Re’s Group Chief Underwriting Officer says: “The implementation of the coal policy is a major step forward in ensuring that our business activities are aligned with the Paris Agreement and related national efforts. We are working with our clients to find the best solutions that enable them to adapt to a low-carbon economy.“
The group-wide thermal coal policy is an integral part of Swiss Re’s Sustainability Risk Framework. Swiss Re consistently uses this framework for all underwriting and investment activities as to minimise sustainability risks. The thermal coal policy applies to both existing and new thermal coal mines and power plants, and is implemented across all lines of business and Swiss Re’s global scope of operations, according to Swiss Re.
Patrick Raaflaub, Swiss Re’s Group Chief Risk Officer says: “It has been our goal to develop a comprehensive approach to coal underwriting. This has been a complex task and I am very pleased that we are now in a position to start rolling out our thermal coal policy.“
The 30% threshold applied is in line with the thresholds on the investment side. To contribute to a low carbon environment and actively mitigate the risk of “stranded“ assets, Swiss Re already by the beginning of 2016 stopped investing in companies that generate 30% or more of their revenues from thermal coal mining or that use at least 30% thermal coal for power generation, and Swiss Re divested from existing holdings.
Furthermore, Swiss Re consistently integrates Environmental, Social, and Governance (ESG) criteria in its investment process and was among the first re/insurance companies to switch to ESG benchmarks for its actively managed equities and credit portfolios. In a recent publication, Swiss Re shares its experience on that move, according to Swiss Re.
At the same time, Swiss Re is convinced that improving energy efficiency and developing low-carbon technologies, including insurance coverages and investments in renewable energy sources, are critical to reducing greenhouse gas emissions and securing future energy supplies. Swiss Re partners with clients to give them the security needed to realise their sustainable energy projects.
In cooperation with solar photovoltaic research institutions, Swiss Re developed an international guideline on risk management and sustainability of solar panel warranty insurance, the so called Solar Panel Code of Practice (SPCoP). It will help all involved parties, including producers, buyers, investors, banks and insurers to assess the long-term quality and reliability of solar panels and provide them with a best practice risk management framework to mitigate losses.
Swiss Re is also encouraging the use of solar energy through its commercial insurance arm, Swiss Re Corporate Solutions. It has invested in a new product, the Solar Revenue Put, which promotes the development of solar energy by driving down investment risk and making solar energy projects cheaper to finance.
Swiss Re Corporate Solutions’ offerings to the renewable energy market also extends to wind power. According to its recent study, wind power producers could face significant income losses as governments scale back their financial support for these projects. Through the use of wind hedges, Swiss Re Corporate Solutions helps protect wind power producers from reduced cash flow and earnings volatility.
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