Munich Re plots to knock quarter of emissions by 2025 — but finds march to net zero ‘incredibly difficult’

Global reinsurer  Munich Re will cut the greenhouse gas footprint of the equity, corporate bond and real-estate portions of its investment portfolio by 25 to 29 percent to 2025, with heightened cuts for hydrocarbon industry exposures, as it ramps up its march to a net zero position to 2050, officials said late Wednesday, December 8.

No targets have yet been set for the full investment book given lingering inabilities to measure the environmental footprint of remaining asset classes, including the heavyweight category of sovereign debt.

The insurance side of the business will also plod a course to net zero, but short-term targets only include select hydrocarbon exclusions, again on account of shortfalls in rating methodologies for other industries.

“We have climate targets that need to be reached by 2025,” Silke Jolowicz (pictured), the head of Munich Re’s group sustainability department, told participants to the online presentation.

“We have set targets for 2025 and we will continue to do so, probably in five-year cycles in the years up to 2050,” she said, with note that she would “certainly hope” that select targets can be beaten along the way.

Much of the early move falls on the hydrocarbon industry. The 2025 targets include a 35 percent reduction from just the thermal coal industry and 25 percent from oil and gas. Munich Re currently rules out investments where revenues are more than 30 percent from thermal coal or 10 percent in oil sands.

Thermal coal has been singled out for a quicker march to the door: the entire sector should be off the book completely by 2040, both as an investment asset and an insurance liability.

The greening of the investment portfolio will also see a near doubling of the renewable energy book 2019 to 2025 to some €3 billion.

On the insurance side, expect thermal coal production capacity (not emissions) in the insurance portfolio to fall by 35 percent from 2019 to 2025. Emissions from oil and gas sector insurance covers should be down by an estimated 5 percent to 2025. Munich Re has already made select exclusions for new coal mining operations, new coal-fired generation and oil sands.

Data and ratings remain a challenge, but existing methodologies are sufficient to launch the programme towards the 2025 goals on the investment side, Timo Greggers, Munich Re's head of strategic asset allocation and ESG investment strategy, said.

Equity, corporate bond and real estate exposures are sufficiently measured across the market to enable the early steps. “We will extend the scope of asset classes as data becomes more available,” Greggers said. Hopes are high for results in the coming year from the Net-Zero Asset Owner Alliance. Sovereign bonds, infrastructure investments, private equity and other asset classes remain “complex,” he admitted.

Data and methodologies for the insurance side remain even more remote, and the work amongst participants in the Net Zero Insurer Alliance is proving to be an “incredibly difficult task, to be honest,” Jolowicz admitted.

Munich Re will begin publishing its stance vis-à-vis the EU taxonomy beginning with the 2021 annual non-financial report, officials indicated.

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