In a report published on Thursday 11 April, the NGO Finance Watch called for the urgent adoption of supervised transition plans for insurance companies in order to reduce the risks of financial instability linked to climate change. According to the NGO, the latter is fed directly by the activities of the financial sector.
“In a vicious circle dubbed the ‘climate-finance death loop’, the financial sector continues to exacerbate climate change by enabling fossil fuel companies to operate, thereby endangering its own existence through the threat climate change poses to financial stability”, wrote FW, stating that this interrelationship between finance and the environment could lead to a “devastating financial crisis”.
The authors also warned against a protection deficit: “Additionally, an increase in the occurrence of severe natural disasters carries with it an increase in damages. When the insurance sector is no longer able or willing to cover these damages, the burden is transferred to society”.
Finance Watch has made five recommendations for the development of transition plans for insurers: prioritise the reduction of greenhouse gas emissions in all aspects of asset and liability portfolios; develop transparent investment policies; use all available engagement tools to achieve sustainability objectives; implement global governance with transition objectives, including through remuneration incentives; integrate transition planning into supervisory processes to ensure financial stability taking into account sustainability factors.
Link to the report: https://aeur.eu/f/bqc (Original version in French by Bernard Denuit)