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Setting Protocol For Sustainable Insurance On Net-Zero Emissions

Forest in Shirui Kashung mountain.

The issue on Access and Benefit Sharing (ABS) over the use of resources from forest and wetland ecosystems has long been a contended issue, with States primarily dominating over the decision-making processes and ignoring the rights of the local people, thus resulting in stand-offs for years on end.

By Salam Rajesh

The deliberations on climate issues are taking centre-stage in global forums with critical topics on the menu, and there are serious thoughts being put into targets that seek human welfare in the face of possible crises in future times, over climate impacts.

That is exactly what the UN Environment Programme, Finance Initiative and the Principles for Sustainable Insurance had in mind when bringing forward their collective report on “Target Setting Protocol” (2022) under the lead of the Net-Zero Insurance Alliance (NZIA).

Considering safety nets for people in general under a possible climate crisis scenario at any point of time is what matters now, even as science-based reports keep reminding people at large that there are concrete evidences of changing phenomena in the climatic conditions worldwide, with many nations already experiencing different forms of impacts – ranging from extreme droughts to rainfall deficits, floods from glacial melts and glacial lake outburst, coastal shores slowly going under water as sea level rises steadily by the year, coral reefs dying, and many more.

The impact is, of course, on everyone, irrespective of who is rich or who is poor. As for instance, ground water depletion will impact everyone – whether one lives in an urban setting or in a rural landscape. When the water sources dry up, everybody is impacted – without water life is impossible. The thinking, therefore, is to insure safety nets in the face of eventualities.

The UNEP and team’s report on Target Setting Protocol hints at that the members of the Alliance (NZIA) have committed “to transition all of their respective operational and attributable greenhouse gas (GHG) emissions from their respective insurance and reinsurance underwriting portfolios to net-zero emissions by 2050”.

This thought process is consistent with the “science-based pathway to limiting global warming to a maximum temperature rise of 1.5°C above pre-industrial levels by 2100 in order to contribute to the implementation of the Paris Agreement” as the report puts it.

The protocol takes into consideration the “latest available scientific knowledge and associated social impacts, and the findings of recognized reports such as the 6th Assessment Report by the Intergovernmental Panel on Climate Change (IPCC) and the Net Zero by 2050 report by the International Energy Agency (IEA)”.

In line with the United Nations’ thrust on containing the reported global temperature rise well below the ‘red zone’, the NZIA Commitment is made with the “expectation that governments will follow through on their own commitments under the Paris Agreement of holding the increase in the global average temperature to well below 2°C, preferably 1.5°C”.

The UNEP and team’s report states that the “Science Based Targets Initiative (SBTi) defines and promotes best practice in science-based target setting and independently assesses companies’ climate targets. SBTi has long recognized the key potential that financial institutions have to support the economy in reducing GHG emissions, even without direct control over those reductions”.

The discussions on net-zero emissions have been doing the rounds during these past many years, leap-frogging from one global summit to the other, and one of the evident thrusts has always been on bringing to task the extractive industries and big-time companies who basically are at the fault-line on faulty carbon emissions.

Of particular interest in the report is the assertion that, “It has been recognized that the shift to a resilient net-zero economy will likely increase prosperity and could be a net driver of job creation. However, there will be transitional challenges for employees, communities, cities and countries while this shift takes place”.

To address this, the report emphasizes that “re/insurance strategies dealing with climate change must consider the social consequences that a rapid net-zero transition might cause, while ensuring that it is inclusive and that no one is left behind – a core principle of the UN’s Sustainable Development Goals”.

In the backdrop of this discussion is the push on carbon pricing and the principle of Payment on Ecosystem Services (PES) as mechanism to fuel interests towards ecosystem restoration in meeting climate goals within specified time-frames.

This brings to the forefront of climate discussions as to how the proactive participation of Indigenous peoples and local communities, many of whom are already engaged actively in traditional forms of sustainable forest management, can be achieved meaningfully in close coordination with Governments – which itself is a hard task to achieve on ground.

The clear stand of the United Nations in stating that Indigenous peoples play significant role in ecosystem restoration signals the need for Governments to re-think on their policies. This necessitates incorporating Indigenous peoples as partners in conservation.

The issue on Access and Benefit Sharing (ABS) over the use of resources from forest and wetland ecosystems has long been a contended issue, with States primarily dominating over the decision-making processes and ignoring the rights of the local people, thus resulting in stand-offs for years on end.

In achieving net-zero emissions, it is altogether not about curbing the end-use on fossil fuels but also to usher in a system where landscapes ravaged by fossil fuel extraction by companies are brought back to life through a robust ecosystem restoration program that looks at the participation of all stakeholders, including Indigenous peoples whose lands are often usurped by the incoming companies for their extractive businesses.

The Protocol suggests two possible target types under the emissions reduction target category, with each NZIA member being free to unilaterally choose which of these it will select when setting its target(s).

The first is ‘an overall emissions reduction target type that uses a global, economy-wide proxy to guide the ambition level for re/insurers’ own insurance-associated emissions reduction targets’.

The second is a ‘sectoral decarbonisation approach (SDA) that seeks to converge an individual re/insurance portfolio’s physical carbon intensity to a given decarbonisation pathway at the sector level’.

On a general note, it may be inferred that a pathway to re-insure the loss in ecosystem services due to human interventions may be designed in a way that displaced communities too are compensated appropriately to ensure livelihoods security and to instill renewed interests in conservation to achieve climate goals.

(The writer looks at environmental stories through the journalistic lens. He can be reached at [email protected])

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