Insurance key in transitioning to net zero peacefully, warns new report from UN Environment ProgrammeCredit: Shutterstock/Gareth_Bargate

Insurance key in transitioning to net zero peacefully, warns new report from UN Environment Programme

It has been recognised that the shift to a resilient net-zero economy will likely increase prosperity and could be a net driver of job creation, however transition could be costly on a social level.

Now a new report, Insuring the net-zero transition: Evolving thinking and practices, produced by the Net-Zero Insurance Alliance and convened by UN Environment Programme’s Principles for Sustainable Insurance Initiative, warns insurance strategies dealing with climate change must consider the social consequences that a rapid net-zero transition might cause, while ensuring that it is inclusive and that no one is left behind – a core principle of the UN Sustainable Development Goals.

It says: “The concept of a just transition comes from combining climate action with social inclusion. Implementing a just transition does not mean slowing down the path to a net-zero economy but incorporating social risk management related to workers and local communities into the insurance activities associated with implementing the strategies stemming from the Paris Agreement.”

The report goes on to warn that if not managed, unemployment, community discontent and lack of labour skills could slow down and even halt the net-zero transition process.

“Insurers, especially life and health insurers, through their protection, pension, savings and health propositions, provide an important pillar of social protection systems. Obviously, these vary from country to country depending on the political expectations of electorates, the social protection systems put in place by governments, and the laws and regulations of different jurisdictions that govern them. On their own, life and health insurance policies are not sufficient to manage all the risks that come from the transition to net zero, so governments will need to play their part in managing these risks.”

It is not optimistic, saying: “Given the long-term consequences of the Covid-19 pandemic and the effect it will have on the world’s ability to address the global risk of climate action failure, such as reducing the attention and focus needed for governments to take effective and quick climate action, it is hard to see how any transition of this scale can be anything but disruptive and disorderly.

“And if greenwashing and stalling on climate commitments delay the net-zero transition, then there will be even more disruption as more radical policies will be needed to decarbonise and achieve the net-zero transition goals.”

The report concludes: “In this context, it becomes even more important for insurers to work with governments to ensure that people have access to social protection through life and health insurance products that complement and support other social protection systems offered by governments to their citizens.

“This could pave the way for a greater opportunity for the insurance industry to play a leading role in insuring a net-zero transition that is just, inclusive, resilient and sustainable.”

Read the report at: https://afahpublishing.com/wp-content/uploads/2022/05/Insuring-the-net-zero-transition.pdf

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