Global insurers are pushing the boundaries of environmental organizations supported by the UN. The Net-Zero Insurance Alliance (NZIA) has 30 members in March, or around 15% of the total number of premiums written worldwide. Now, only 13 companies remain in NZIA, a crucial financial platform for insurers to set decarbonization goals and a member of the Glasgow Financial Alliance for Net Zero (GFANZ).
On the surface, insurers appear to be leaving the country due to the US. GFANZ, which also includes the Net-Zero Banking Alliance (NZBA) and the Net Zero Asset Owner Alliance, has made common pledges to reduce carbon emissions. A coalition of Republican state attorneys general have claimed that these agreements may violate US antitrust laws. Given that the insurance industry is governed at the state level, this is especially significant for insurers. The "war on woke" being waged by state lawmakers threatens to drive away even those that choose to remain in the NZIA.
But American exceptionalism is by no means the complete picture. While local lawmakers are much more concerned with fossil fuels coming from other sources due to the 2022 energy security issue, the European Union has pledged to abandon Russian gas and oilby 2027 and already replaced roughly two thirds of Russian gas last year. Germany and other nations are increasing their dependence on coal to fuel their economies. As reported by Germany's state statistical office Destatis, the generation of power in the largest economy in Europe increased by 8.4% last year with coal making up one-third of the nation's electricity output in 2022.
This change must be made. Despite what their flowery corporate reporting may claim, financial organizations would prefer to do without new decarbonization targets like those announced by the NZIA in January since they make the jobs for managers more difficult. The primary factor in European groups' greater acceptance of them than that of their transatlantic counterparts is the support of European lawmakers who are dedicated to achieving objectives like reducing EU emission by 55% by 2030. Instead of abandoning coal companies, insurers are under political pressure right now to maintain them as clients.
Financial organizations that don't offer insurance have largely remained loyal to GFANZ so far. But that is partly because doing so is now easier. The umbrella body was forced to abandon a requirement that its members join the so-called Race to Zero movement last year. The NZBA would have experienced a similar exodus to the NZIA had it not separated itself from suggestions like a mandate to limit new fossil fuel development. Grandiose partnerships on the subject of climate change will appear more meaningless as long as politicians from both sides of the Atlantic are preoccupied with issues related to energy security.