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AIA leads Asia-Pacific insurers in adopting SBTi
Largest regional life insurer debuts climate transition plan, targets portfolio emissions
The Asset 24 Nov 2023

Just one week ahead of the UN annual climate summit COP28, Hong Kong-based, Asia-Pacific-focused insurance firm AIA Group, together with its subsidiaries, published its first climate transition plan, which outlines its near-term science-based carbon emission targets to be achieved by 2030, and long-term net-zero commitment to be realized by 2050.

Notably in its plan, the near-term science-based carbon emission targets of the company, which is the largest life and health insurer in the Asia-Pacific region, are validated by the Science Based Targets initiative (SBTi), a global body enabling businesses to set ambitious emissions reduction targets in line with the latest climate science.

The plan covers the company’s carbon emissions in both its business operations and general account in-scope investment portfolio. The latter covers 55% of its total investment and lending activities by general account assets under management as of 2019.

On the business operation side, the insurer plans to have its Scope 1 and Scope 2 emissions (direct emissions) cut by 46.2% by 2030 from a baseline of 74 kilotons of carbon dioxide equivalent in 2019, which is aligned with the 1.5 degrees Celsius pathway set out in the Paris agreement.

Of these direct emissions, 95% come from buildings and 5% come from vehicles; and the insurer aims to reduce them by improving energy efficiency in its real estate holdings, switching to electric vehicles and procuring renewable energy.  

However, for insurance companies, the lion’s share of their carbon emissions come from their investment portfolios, which are categorized as Scope 3 emissions under the GHG Protocol. Therefore, the insurer also set decarbonization plans for its investee companies to reduce these indirect emissions.

Following the guide of the SBTi, the company assesses the portfolio-level carbon emission reduction progress through the portfolio coverage approach, which measures the share of in-scope portfolio emissions with validated SBTi targets, and the sectoral decarbonization approach for power generation and real estate investees, which measures greenhouse gas emission intensity in the respective industries.

Key near-term targets include having 31% of the in-scope listed equities and corporate bonds obtaining SBTi validation by 2025, and greenhouse gas emissions intensity for power generation and real estate reduced by 49.3% and 58.3%, respectively, by 2030, both with 2019 as the base year.

To deliver these commitments, the insurer will adopt investee engagement, maturity management and new opportunity exploration to ensure companies under coverage meet the SBTi requirements on time.

As part of its broader climate reporting, the company tracks its climate progress through the weighted average carbon intensity and total financed emissions, as recommended by the Task Force on Climate-Related Financial Disclosures.

The insurer, as of December 31 2022, has invested US$4.3 billion into green, social and sustainability bonds. And, looking ahead, it envisions an ambitious climate stand by ensuring a just transition, safeguarding biodiversity and understanding the impact of climate change on health.

Asset owners and managers including banks, insurance companies alike are drivers for financing renewables and phasing out fossil fuels; and, therefore, their pledges to climate transition are essential to demonstrate the financial industry’s green development determination.

The data disclosed by the SBTi and climate standard-setter CDP show that, as of December 31 2022, 48 companies in the banking, diversified finance and insurance sector have applied SBTi validation for their climate transition plans, of which 28 have set up science-based targets that match SBTi requirements.

AIA is not the first insurer to publish a climate transition plan. Competitors like Prudential and Allianz have launched their own climate transition plans, in March and September 2023, respectively. Nevertheless, the publication of the AIA plan makes it the first pan-Asian life and health insurer to have near-term science-based emissions reduction targets validated by SBTi.

“We have a responsibility to take actions to address climate change,” shares Lee Yuan Siong, AIA Group chief executive and president. “Our first climate transition plan sets out a clear implementation roadmap to achieve our near-term climate targets and integrate climate considerations into our core business, supporting our path towards net-zero emissions by 2050.

The move is a good teaser before the curtain rises on COP28, which calls for stronger climate finance by financial institutions. Hopefully, more financial institution in Asia, and globally, will follow AIA’s example and join the queue to net zero.

 

 

  

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