Lloyd’s, the world’s leading marketplace for commercial, corporate and specialty risk solutions, has today announced it is joining the UN-convened Net Zero Insurance Alliance (NZIA), further affirming its commitment to cross industry collaboration to mitigate and manage the impacts of climate change and support the speed of the transition to net zero.
In joining the alliance, the Lloyd’s Corporation* commits to transition all of its operational and attributable greenhouse gas emissions to net-zero by 2050, at the latest. It will also set, publish, and report against, interim science-based targets every 5 years to drive near term action (1).
This builds significantly on Lloyd’s commitment to reduce all the operational emissions at its landmark building in London to net zero before 2025 (2), by setting out further substantive actions across two major levers:
1. Transitioning Lloyd’s Central Fund to net zero
The Lloyd’s Central Fund (net assets of £3,019m at HY 2021) provides protection for Lloyd’s customers and the market against severe tail end events. In joining the NZIA, Lloyd’s will transition the Central Fund to net zero by 2050, by redirecting capital flows to green investments that enable and accelerate the transition. Lloyd’s will publish a detailed roadmap to achieve this goal within 12 months, drawing on best practice through the Net Zero Asset Owner Alliance and outlining interim 5-year targets.
2. Leading the Lloyd’s market to a net zero underwriting position
Lloyd’s will advocate and support all market participants to introduce and implement their own net zero plans in order to reach a net zero underwriting position for the market by 2050 at the latest. These new formal expectations will be embedded into the Lloyd’s market oversight framework, putting climate action at the heart of annual business planning cycles with syndicates.
Underpinning this critical development, Lloyd’s is creating a new market-wide ‘Sustainability Transparency and Reporting Regime’ which will be used to measure and report on the market’s progress towards a net zero underwriting position by 2050. The measurement framework will be piloted with a select group of managing agents in 2022, before being refined and scaled across the marketplace in 2023.
The Transparency and Reporting regime will be aligned with and support the ambitions of the Net Zero Insurance Alliance and Partnership for Carbon Accounting Financials (PCAF) to develop a standardised methodology to measure and disclose the GHG emissions of insurance and reinsurance underwriting portfolios, and will help catalyse further action throughout the sector.
By joining the Net-Zero Insurance Alliance, convened by the UN’s Principles for Sustainable Insurance Initiative (PSI), Lloyd’s also becomes part of the Glasgow Financial Alliance for Net Zero (GFANZ), the UN-backed group for financial institutions to make credible net zero commitments through the UN’s Race to Zero. GFANZ now includes over 250 financial firms from across the entire financial system, which are responsible for assets in excess of $88 trillion and are committed to aligning capital with net zero.