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On the Money

A climate solution disguised as an administrative decision

Companies are increasingly focused on their financial carbon footprint. Choosing a sustainable insurance provider can provide an overlooked lever for change.

Tanker ship, with oil platform, in background, on offshore area at sunset.

A company’s choice of insurance provider is consequential for climate impact, given that fossil fuel extraction and use is the primary source of global CO2 emissions. Image via Shutterstock/Nightman1965

Tackling the climate crisis requires companies and financial institutions to pull every change-making lever in reach. But not all levers are as shiny as capturing carbon and water from thin air or raising multi-billion-dollar funds

Some, such as a company's choice of insurance provider, reveal impactful solutions hidden as administrative costs.

Creating market-force momentum to reward insurance firms that are committed to stop underwriting fossil fuel development is an overlooked — and less burdensome — way of accelerating the clean economy transition.

A company’s choice of insurer is consequential for climate impact given that fossil fuel extraction and use is the primary source of global CO2 emissions. The International Energy Agency has emphasized that new fossil fuel development must end in order to bend the climate curve and development can’t happen without financing — which can’t happen without insurance. 

Increased focus on financial footprints

Financed emissions, which live under the Scope 3 umbrella, make up the overwhelming majority of financial institutions’ emissions. BlackRock, for example, could shutter all of its offices and cancel all employee travel tomorrow and, from the atmosphere’s vantage point, the impact would be near nil. 

As such, the finance sector has been on the journey to capture this emission category for some time — 80 percent of banks in Sustainable Fitch’s database, for example, already report their Scope 3 emissions

But for sustainability leaders at non-financial companies, financial carbon footprints — which include corporate cash reserves, 401(k) investments and insurance premiums — present newer territory. 

"For the practitioners that have been focused on Scope 3 … we haven’t been socialized to consider this," Ashley Orgain, chief impact officer for Seventh Generation, a company further along in the sustainability journey than many, told GreenBiz’s Heather Clancy

Many practitioners, though, already understand the "intangible benefits of being a part of something where the same money you already need to spend on insurance becomes a brand asset, with mission alignment to climate action," Brad Stevenson, CEO of Premiums for the Planet, told me. 

Launched in 2022, Premiums for the Planet works to aggregate the collective spend, influence and voice of insurance buyers to expand climate action in insurance.

Kicking off a conversation on insurance

Insurers are primarily society’s risk managers, and should thus take responsibility to actively avoid climate breakdown and drive the transition to a low-carbon economy. 

Commercial insurers — be it for general liability, property and casualty, vehicle or life insurance — make up the second largest institutional investor category globally. More than half of the United Nations-convened Net-Zero Asset Owner Alliance, for example, is insurance firms.  

But insurers looking to clean up their portfolios have faced a Republican-led pushback on climate initiatives in the United States. 

The U.N.-led Net Zero Insurance Alliance, a group of insurers and reinsurers transitioning their underwriting portfolios to net-zero emissions by 2050, saw seven of its members — including five of the eight founding signatories — leave after 23 states attorneys general claimed that the Alliance’s targets and requirements could violate antitrust laws.

Nevertheless, for companies looking to reduce their financed emissions impact, choosing an insurance provider will be increasingly important. Changing business-as-usual demands that the most "usual" parts of business are leveraged to accelerate climate progress. 

"It costs nothing, requires no additional energy, disruption or sacrifice," said Stevenson. "We approach the insurance sustainability opportunity through sustained, directed, strategic and collective action. It's the only way to break the status quo."

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