New data from independent investment manager Twelve Capital shows that reinsurers are leading the way in terms of some net zero targets within the wider financial industry, with 50% having adopted operational 2030 targets, compared with just 18% in the sector more broadly.
But despite this stand-out figure, Twelve Capital maintains that “more urgency is needed” across the board, and says there “is no path to net zero” without first addressing a major investment gap that will require the reallocation of capital by financial institutions.
Analysts note that currently, less than half of climate finance flows are funded by the private sector, despite issues such as transition risk having now become top priorities at board level.
A recent survey by Twelve Capital suggests that these issues are becoming baked into governance principles amid increasing expectations from both shareholders and a more complex raft of climate regulation.
Companies have also cited better returns and capital efficiency via reallocating capital away from high to low carbon activities and by avoiding stranded assets.
Furthermore, Twelve Capital did note improvements in company’s net zero efforts overall, with 62% of 224 companies it surveyed having adopted some kind of climate orientated investment intention in 2022, versus 57% in 2021.
Within this Banks & Asset Managers conveyed the biggest increase in intentions on the investment side, while insurance was relatively mixed, with P&C in particular deteriorating which was however offset by an improvement in multiline Insurers.
Half of all companies graded also adopted a net zero 2050 investment target vs 35% in 2021, but analysts believe short-term commitments are lagging, with only 37.3% professing a short-term commitment last year.
Additionally, in 2022, 48% of all companies graded adopted a strategy towards divestments rotating away from high to low carbon activities, compared to 33% in 2021.
And for insurers, between 40-50% of companies within reinsurance, P&C and multiline are actively walking away or have an intention to reallocate/divest their underwriting book towards low carbon projects/activities.
But despite this only between 10%-20% of companies across all three subsectors are actively engaging with their clients, Twelve Capital says.
