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Zurich to vote against directors at shareholdings that lag on climate

climate change

Zurich Insurance Co. Ltd. is upping pressure on companies it invests in to set climate action targets in line with the Paris Agreement and limit global warming to 1.5⁰C.

It also plans to begin asking commercial customers how they are planning to adapt their business to reduce climate change.

During the next two years, Zurich will target companies that produce 65% of its portfolio emissions and require them to set emissions reduction goals or face shareholder action. “Should engagement fail and companies refuse to set targets after due dialogue, Zurich will vote against board members at shareholder meetings,” Zurich said.

It added that simply divesting from companies with carbon-intense footprints is “less effective than engaging with them to drive the shift to sustainable practices.”

The insurer has set new targets to cut carbon intensity in its listed equity and corporate bond investments by 25% by 2025, and by 30% for direct real estate investments. It had previously already committed to hold a net-zero investment portfolio by 2050.

“The new emissions-reduction targets for our investment portfolio put the engagement with companies we invest in at the center of our responsible investment approach,” said Urban Angehrn, Zurich’s group chief investment officer. “We will use our position as a large investor to ensure climate change is high on corporate agendas and exercise our voting rights to accelerate the transition to a climate-neutral economy.”

Publishing further climate goals, Zurich said it will cut emissions from its own operations by 50% by 2025 and 70% by 2029, to put it in line with the Paris Agreement. Group CEO Mario Greco said Zurich’s operations have been carbon neutral since 2014 but it will achieve cuts in remaining emissions during the next few years by switching to renewable power, using electric vehicles and curbing business travel.

Zurich also wants to develop industrywide standards to measure emissions from insurance underwriting alongside industry bodies and policymakers.

And it will analyze reported carbon emissions from its commercial customers to understand how buyers plan to adapt their operations in the next five to 10 years.

By the end of 2020, Zurich had stopped insuring and investing in more than a third of 268 companies that it identified as exposed to thermal coal, oil sands and oil shale, and unable or unwilling to adopt greener practices.

It did not renew insurance contracts totaling more than $30 million in gross written premiums and it has divested assets worth almost $500 million since 2017.

The group revealed that the end of last year it was in talks with 42% of companies close to or above the underwriting emissions policy limits and said it expects commitments from them by June 2021 to meet threshold targets.

“The group is committed to using every lever available – investments, operations, and products and services – to accelerate the transition to a net-zero-emission economy,” Zurich said.

Commercial Risk Europe is a sister publication of Business Insurance. More stories from CRE here.