A new report explores seven key sectors and technologies to understand their transition trajectory to net zero and identify the main challenges and risks they will face. The new report, developed by Marsh McLennan in partnership with the Sustainable Markets Initiative Insurance Task Force (SMI ITF) says the insurance industry has an important role to play in shaping the path to net zero.
The path goes through evolving and deploying its core risk transfer offerings and clearly articulating to potential customers the value proposition.
The report also identifies how the insurance industry can catalyse the transition in hard-to-abate sectors. The research, carried out by interviewing C-Suite and heads of risk management from various real economy firms, explores seven sectors vital to achieving global net zero targets.
Energy – sustainable energy sources will be pivotal; the insurance industry offers a wide range of products that support the development of wind and solar projects. As these continue to grow, they face unprecedented challenges. Insurers will need to evolve the products offered to support the progression.
Fusion – the universe's most powerful form of energy. Its ability to provide clean, reliable, baseload power could make it a vital tool; there is an expectation that fusion energy could be commercially viable in the next ten years and that the insurance industry would have a central role to play in de-risking this.
Mining – the mining sector will play an integral role in the move towards renewable energy sources. Solar panels, wind turbines, and electric vehicles require a significant amount of minerals. As these clean technology projects mobilise and expand, global demand for key minerals is also expected to nearly double.
Aviation – there are two critical areas of carbon abatement for the aviation industry: reducing the reliance on aviation and increasing the use of sustainable aviation fuels. Insurance has a pivotal role in decarbonising aviation by de-risking emerging energy technologies and sustainable fuel alternatives.
Shipping – the shipping industry accounts for approximately 2% of total global CO2 emissions, and it’s estimated international shipping activity will more than double by 2050. The use of alternative marine fuels is integral to reducing GHG emissions. Insurance can support in the decarbonisation of shipping.
Space – we rely on a safe and sustainable space to understand our planet and to support communications critical to the global economy. Active satellites in orbit have doubled since 2021; space is increasingly cluttered with debris. There is an opportunity for insurance to de-risk investment in space.
Agribusiness – traditional fertilisers have contributed to soil degradation, water pollution, and greenhouse gas emissions. As farmers transition to and implement regenerative agricultural practices, this requires buying new machinery and/or more staff. Insurance can de-risk the financial investment of the farmer and/or off loader.
This provides an overall picture of where the insurance industry can provide the necessary risk solutions to catalyse the transition.