Net-zero in investments – Zurich Insurance

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We are committed to transitioning our own investment portfolios to net-zero by 2050.
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Every business and asset will be affected by climate change, and collective action is needed to mitigate or adapt to it. Unfortunately, our analysis suggests that we are currently likely to miss the Paris Agreement’s target of limiting global warming to 2°C or below, and more action is needed. As an insurance provider, we are already witnessing challenges associated with climate change affecting our customers across the globe. As an insurer and investor, we have a direct interest in sustainable global economic growth and in supporting communities to become more resilient to environmental and social challenges. Therefore, we are committed to transitioning our own investment portfolios to net-zero greenhouse gas emissions by 2050.
Net-zero portfolio by 2050:
Scenarios:
Strengthen ESG integration:
Benchmarks:
Finance the transition to a climate neutral economy:
Drive change through advocacy:
Engagement:
Selective exclusions:
We strongly believe that asset owners like Zurich must act now to leverage capital markets to fund solutions to the most pressing environmental issues of our time. Since becoming the first insurer to sign the UN Global Compact Business Ambition for 1.5°C pledge, we joined the UN-convened Net-Zero Asset Owner Alliance as a founding member – an important step in transitioning toward a carbon neutral economy and true to our philosophy of advancing together.
Zurich has committed to transitioning its investment portfolios to net-zero greenhouse gas emissions by 2050.
Decarbonizing our portfolios is a massive undertaking – but a necessary one. As we start this journey, a lot of expertise and innovative thinking will be required to design the methodologies and tools necessary to decarbonize in a way that is both prudent and effective. As stewards of large portfolios, asset owners are in a unique position to start and shape this journey. But none of us can do it alone. We invite you to join us in doing the right thing for people and planet. Read more here about the UN Net-Zero Asset Owner Alliance.
A thirty-year journey must start with first steps. Accordingly, we have set interim targets for engagements, financing solutions and emission reductions in a variety of asset classes, which will be broadened as suitable methodologies become available. See details described in the chapters below.
Zurich strongly believes that simply divesting from companies with carbon-intense footprints is less effective than engaging with them to drive the shift to sustainable practices. Many of these companies have the knowledge and engineering capabilities required to make a green transition and harnessing this can benefit sustainability goals. Zurich will:
Over a period of at least two years, Zurich will engage with companies directly and through organizations such as Climate Action 100+ and the Asset Owner Alliance. Should engagement fail and companies refuse to set targets after due dialogue, Zurich will vote against board members at shareholder meetings.
In addition, we will keep advocating for, and engaging on, industry action, as well as public policies, for a low-carbon transition of economic sectors in line with science and under consideration of associated social impacts.
The transition to a net-zero economy will require financing for the development of new and replacement of existing technology. The scale of the changes required will vary from industry to industry, with some sectors requiring more investment than others.
As one of the world’s largest asset owners, Zurich will leverage its investments to help mitigate climate change. Our investment strategy aims to benefit society and the environment through, for example, impact investing. We mitigate environmental risks by supporting a climate neutral economy and increasing community resilience.
Zurich’s targets for financing climate solutions enhance our existing long-term commitment to provide green financing solutions under our impact investing strategy announced in 2017. We will:
We are financing the transition to a climate neutral economy by investing in the following asset classes:
Zurich’s emission reduction targets cover both listed equity and corporate bond investments as well as direct real estate investments. By 2025, Zurich aims to:
All targets are set against a 2019 baseline, based on latest available emissions for December, 2019: 136 metric tons CO2-equivalent per USD million invested (market value based) for listed equity and corporate bond investments; 32 kilograms CO2-equivalent per square meter for real estate investments.
Zurich will continue to take a leading role in the development of CO2-reduction methodologies and initiatives for other asset classes, such as sovereign debt and infrastructure.
Carbon intensity for investments portfolios
Zurich defines the carbon emissions intensity of an issuer as metric tons of CO2-equivalent greenhouse gases emitted (under scope 1 and scope 2 of GHG protocol) per USD millions of capital deployed, aligned with the Asset Owner Alliance target setting protocol. For non-financial companies, capital is defined as enterprise value, and for financial companies, market capitalization is used as a proxy. This is multiplied by Zurich’s outstanding investment amount of that issuer. To derive portfolio level intensity, we use the simple mathematical average of total portfolio carbon-equivalent footprint per million USD in portfolio market value.
While we have a strong preference for ESG integration and engagement, there are certain areas where we believe strict exclusions for certain activities are justified. We stand by our position on thermal coal, oil sands and oil shale, established in 2017. A description of our current position can be found here, stating that Zurich generally will no longer underwrite or invest in companies that operate above our defined thresholds.
In accordance with the thermal coal, oil sands and oil shale policy, all initial engagements were concluded by midyear 2021. All companies covered by the thresholds have either been cleared, excluded or are under continued engagement depending on whether they presented credible transition plans. Progress on these targets is monitored and can be revoked if companies fail to meet their transition targets.
For those companies that neither had science-based targets to decarbonize nor a credible plan for a transition from thermal coal, oil sands or oil shale, we have stopped writing new business, initiated the transition to an alternative insurer, divested from equity holdings, stopped investing in new debt and let existing holdings run-off.
Furthermore, we will only consider new clients or investee companies that are already below those limits or have near-term commitments in place to bring them below the limits.
In line with our overarching net-zero targets for our insurance and investment portfolios, our performance management focus will move from individual sector exclusions to tracking our overall portfolio decarbonization and engagement targets.
Read more about sustainability risk.
A single company or even a group of companies cannot decarbonize our economy alone. It will only happen if enough companies, governments and investors commit and deliver towards their net-zero goals. Every commitment and action adds to the momentum and increases the chance we all succeed. In order to achieve our 2025 targets described above we commit to the following action points:
Zurich mitigates climate change risk with the ongoing implementation of its climate change investment strategy. It encompasses measures from scenario planning and ESG integration, to implementing selective exclusion screens and engaging with both companies and policymakers, while making progress on a net-zero emissions balance sheet by 2050.
Please find our progress report and detailed methodology in the metric and target section in the integrated sustainability disclosure of the Annual Report 2022.
The land and future property was acquired on behalf of Zurich Deutscher Herold in 2021 and construction was completed in January 2023.
Zurich’s private debt investment with MetLife Investment Management has a significant effect on New Jersey’s transition to clean energy generation.
The land and future property was acquired on behalf of Zurich Deutscher Herold in 2021 and construction was completed in January 2023. The De Baak building is a highly sustainable, energy-efficient residential tower boasting 127 apartments in Amsterdam’s mid-market segment, which is part of the affordable housing sector in the Netherlands.
Photo credit: © KondorWessels Vastgoed
The De Baak building is fully in line with Zurich Insurance Group (Zurich)’s ambitious sustainability targets as it combines a variety of sustainability solutions in its objectives to achieve an exceptionally good energy-savings level of -0.25 (EPC). With that, De Baak is not only sustainable in terms of its use of materials, but it also produces energy with solar panels on the roof and the balustrade of the building. Several features ensure a very low energy consumption, such as the highest quality insulation in the shell, triple glass with sun protection properties as well as an overlapping design of the balconies to provide shade. In addition, the building and the surrounding garden collect rainwater in order to reuse it. The building also offers car sharing, electric vehicle-charging stations and a large number of parking spaces for bicycles to enable tenants to commute sustainably.
The Zurich real-estate team is proud to offer urgently needed affordable apartments to families and others eligible for the mid-market segment, who could otherwise not afford to rent such a high-quality apartment in an attractive location close to the city center. This means the investment is in line with the social aspects of ESG (environment, social and governance) as well as with our environmental targets.
In addition, the De Baak building represents a low-risk investment with stable cash flow due to the increasing demand for affordable apartments in Amsterdam.
“This acquisition demonstrates Zurich’s strong commitment to sustainable investments in the real estate sector. We manage a EUR 14 billion real estate portfolio and aim to reduce the intensity of emissions of our direct real estate investments by 30 percent, in terms of kilograms of CO2e per square meter, until 2025. By 2050, the direct real estate portfolio aims be net-zero, meaning it no longer emits any CO2.”
Matthias Hübner, Head of Real Estate Europe at Zurich
Zurich’s private debt investment with MetLife Investment Management has a significant effect on New Jersey’s transition to clean energy generation.
Zurich Insurance Group (Zurich) invested USD 24 million in a USD 200 million financing by MetLife Investment Management (MIM) to support the phase-out of the last two coal-fired power plants in New Jersey, USA. The decommissioning is expected to result in the reduction of 3.9 million metric tons of CO2 in the atmosphere, the equivalent of eliminating over 750,000 passenger cars a year and an estimated USD 30 million cost savings to Atlantic City Electric (ACE) customers. The transaction also supported New Jersey’s Energy Master Plan.
Logan coal plant
The structuring and financing of the loan were overseen by MIM’s Private Capital team on behalf of MetLife and its institutional clients, including Zurich. The financing allowed Starwood Energy Group, the majority owner of the two plants, and ACE, a regulated electric transmission and distribution utility serving approximately 600,000 customers in New Jersey, to retire power purchase agreements between ACE and the coal-fired plants1. Both plants ceased generating coal energy by the beginning of June 20222.
“Zurich is proud to be part of a project that will lead to cleaner energy production by transitioning away from the last two coal plants in New Jersey, which reinforces our progress on our own impact investment targets, which include avoiding five million metric tons of CO2-equivalent emissions, and separately improving the lives of five million people per year,” according to Johanna Köb, Head of Responsible Investment at Zurich.
The USD 200 million loan was attractive to investors for a variety of reasons, such as credit quality, the valuation and maturity of the deal, and the counterparty involved, AEC. Moreover, the ESG component of the deal and the fact that the deal’s payment obligations were already pre-approved by both utility regulators and AEC were additional attractive factors for investors3.
As a responsible investor, Zurich uses capital markets to fund solutions to many of the pressing social or environmental issues of our time. Zurich is committed to transitioning its investment portfolios to net-zero greenhouse gas emissions by 2050 and set interim reduction targets for its corporate portfolio for 2025. Furthermore, Zurich invests in various climate solutions investments via impact investment assets around the globe.
1 https://www.newprivatemarkets.com/metlife-funds-starwoods-200m-decommission-of-nj-coal-plants/
2 Logan 31 May 2022
Chambers 7 June 2022
https://www.pjm.com/planning/services-requests/gen-deactivations
3 https://www.infrastructureinvestor.com/metlife-funds-starwoods-200m-decommission-of-nj-coal-plants/
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