For the last three years, ICMIF has surveyed its members to measure the collective amount of members’ assets under management aligned to sustainable investment frameworks. In 2019, members collectively had USD 280 billion in sustainable investments. This doubled in 2020 to USD 576 billion. In the latest, 2022 ICMIF Members Sustainable Investment Report, ICMIF announced that members held USD 760 billion in investments aligned to sustainable investment frameworks at the end of 2021.

Climate change effects everyone and Folksam has a long tradition of integrating sustainability in its business. In terms of investments, Folksam introduced its investment exclusions and engagement criteria in 2001. Over time this has changed to match with new directions and international conventions. In 2006, Folksam was one of the founding members that established the UN-supported Principles for Responsible Investments (PRI).

In 2019, Folksam became a founding member of the UN-convened Net Zero Asset Owner Alliance. Today, there are over 70 asset owners who work together in their commitment to transition their portfolios to net zero emissions by 2050, consistent with The Paris Agreement.

Folksam has been working with a number of companies that are making a real difference in the fight to combat climate change. For example, Folksam have invested in SSAB, a steel producer with a difference. SSAB and Volvo are collaborating together and have produced the world’s first autonomous vehicles using fossil-free steel: a process in which coal traditionally used in the steelmaking process is replaced with green hydrogen derived from electrolysis.

Influence also plays an important role for Folksam in the drive to avert climate change. Folksam is also using its influence to encourage other companies to speed up their climate change policies, as it did as part of a coalition that recently called for stronger action by the HSBC on climate change in 2021.

90% of GDP globally has some form of climate commitment associated with it. But we need to turn this talk into action by getting more asset owners to become aligned to net zero frameworks as being aligned to sustainability frameworks is not enough. Aviva has committed to be a net zero carbon emission company by 2040, the first of any major global insurance company to target this ambitious goal. This goal will be achieved by a transition pathway aligned with a series of targets to that year. By 2030 the plan is to have cut 60% of the carbon intensity in investments and have achieved a net zero operations and supply chain.

Aviva Investors, the asset manager of Aviva, made a very detailed commitment made to net zero two years ago on operations, underwriting and on the assets side of the business. On the operations side of the business the commitment to net zero is much easier than the asset side of the business. Carbon intensity currently shows a downward trend for Aviva’s portfolio, as companies de-risk their carbon intensity over time to meet their commitments. However, this will not achieve net zero in the required timeframe.

To escalate engagement with carbon emitters, Aviva Investors’ CEO wrote to the top 30 carbon emitters globally informing them that it would divest if they did not sign up to net zero. This is because the asset manager believes these companies will underperform in the long-term and this is consistent with Aviva’s strategy of delivering long-term customer returns.

Divesting alone will not get Aviva’s portfolio to net zero in the long-term. Macro stewardship is required, changing the way the world works. This could include the creation of a carbon tax that is global and chargeable to all organisation, so that they pay through their accounts for the pollution and nature-based pollution. That way capitalism would start to save the planet.

Aviva have been campaigning for 50 years are now calling for a new Bretton Woods global mandate where governments around the world can change the mandates of organisations, regulators and rule setters in respect of climate change, and that this will accelerate government and corporates to net zero.

The world has already started to experience the effects of radical climate change. This will get worse in the next 30 years regardless of any future action. The fight to limit global warming to 1.5°C has been lost. We are now in a race to stop “catastrophic climate change”. Currently trajectories will see global warming of 6°C to 7°C by the end of the century. Humans have never been alive on the planet with temperatures or the greenhouse gas concentration (double what we have now) that we may experience. The task now is not to gentle change the global economy – but to radically change it. We need to completely shift to reduce emissions by 50% by 2030 – not 2050.

The time has come to act…we have to find a way to do more because of the nature of the risks we face. There are two things we need to do: we have to drastically reduce emissions by 50% by 2030 and we have to ‘prepare’ because climate change is certain. It will impact our insurance portfolios, impact our societies and the vulnerable and poor in the world.

How can we prepare? One thing the insurance industry is good at is the mutualisation of risk. This is the key solution going forward and the anticipation of risk and the advisory support that insurance can offer about what to do about that risk in advance. We need to ensure the most vulnerable have some form of protection either by the state or mutual insurance schemes, such as microinsurance, and that governments act.

The ironic thing is that we know what to do and that the solutions are there. The science is wonderfully developed, and we know the capital costs to address climate change is around USD 9.2 trillion a year. This is what has to be invested in climate solutions. Two thirds of this is not new capital but merely a reordering of capital flows.

We need to expand the availability of risk protection through insurance. We need to provide protection for emerging markets and protection for the poor. We need a massive expansion in insurance cover. As we have seen in richer countries, we need to see a mandatory provision of accident compensation insurance available everywhere.

As Sean Kidney, CEO of Climate Bonds Initiative says: “We are lucky, we have a privilege, the privilege to be able to do something when most of the world doesn’t have that privilege. It’s a privilege we must use with care and we must act on.”

Session speakers:

• Anna-Karin Laurell, Senior Vice-President and Head of Sales and Marketing, Folksam (Sweden)
• Mark Versey, CEO, Aviva Investors (UK)
• Sean Kidney, CEO, Climate Bonds Initiative (UK)
• Shaun Tarbuck, Chief Executive, ICMIF, moderator