Eighth sustainability report published: Talanx Group strengthens its sustainability strategy
The Talanx Group significantly sharpened its sustainability activities over the past year. Its eighth sustainability report focuses on the Group’s role in supporting the industry and the economy in their sustainable transformation. The core long-term goal is to achieve net zero by 2050. This is why Talanx has resolved new exclusions in its underwriting business, among other things: additional restrictions on insurance for new oil and gas projects1 will be introduced with effect from 1 July 2023; a multi-stage reduction path has been drawn up detailing the Group’s withdrawal from thermal coal by 2038. In addition to the environmental topics, the Group also increased its focus on social and governance aspects in the reporting period.
“Sustainability is a core component of our Group strategy: we aim to live up to our responsibilities and play our part in ensuring a sustainable future. As an insurer and investor, we are actively supporting our partners in the industry as they transition, and hence promoting sustainable structural change”, said Torsten Leue, Chairman of Talanx AG’s Board of Management. “We are taking the next ambitious steps to underpin this aspiration by introducing new underwriting exclusions, comprehensively including ESG criteria in our investment activities, and consolidating and expanding sustainable structures within our Group.”
Extended exclusions substantiate position in underwriting
Talanx’s additional exclusion policy in relation to the underwriting of new oil and gas projects(1) on an individual risk basis, which was resolved at the beginning of the year, will take effect on 1 July 2023. As of that date, the Group will no longer provide insurance policies for new greenfield upstream oil and gas projects. In addition, it will no longer insure new midstream projects for pipelines and tank farms (new and stand-alone) that are directly linked to greenfield upstream oil developments. It will also exclude insurance cover for any stand-alone oil-fired power plants which have not yet been under construction or operation as of 1 July 2023. In the Arctic region, the exclusion of new oil and gas drilling projects is extended to new covers for existing projects. Equally, the Group will exclude deep sea mining project risks from underwriting as of 1 July 2023.
Prior to this, Talanx had already defined insurance exclusions for fossil fuels. With effect from 2038, the Group will no longer insure any thermal coal infrastructure(2) or business models based on oil and tar sands, which are particularly harmful for the environment. The withdrawal from thermal coal was set out in more detail in 2022 in a multi-stage exit plan, which defines milestones on the reduction path up to 2038.
Internal assessment methodology strengthens sustainability in asset management
For investment decisions relating to Talanx’s own holdings, the existing restrictions for business models based on thermal coal or oil and tar sands have been complemented: As of the reporting period, no investments shall be made in companies involved in new greenfield Arctic drilling projects. Therefore, the screening process excludes those issuers from investment that generate 10% or more of their revenue from offshore oil and gas extraction within the Arctic Circle (66° 34’ N).
A new internal assessment methodology was introduced in 2022 in order to assess the ESG profile of liquid investments. This approach provides support for the Group’s investment strategy and helps Talanx fulfil its role as a responsible investor, e.g. during structured dialogues with issuers.
The Group has set itself the goal of reducing the carbon intensity of its liquid portfolio under own management by 30% versus the 2019 baseline in the period up to 2025 – and it already achieved a reduction of 20% compared to 2019 in the reporting period. The goal of expanding the volume of sustainable investments to EUR 8 billion(3) – originally a target set for 2025 – was met for the first time in 2022. In addition to its investment activities in the area of renewable energy sources, the Group is helping to implement the transition to a sustainable transport system by investing in modernisation projects for the public transport infrastructure, and is promoting effective, low-emissions public transport.
Talanx maintains reductions in its own environmental footprint
Reducing its own carbon footprint is a high priority for Talanx. The Group has been climate neutral (including offsetting) in its own operations in Germany, where more than 44% of its global workforce are employed, since 2019, and plans to achieve this milestone worldwide by 2030. In addition, Talanx has set itself the goal of cutting carbon emissions from its German operations (Scope 1 and 2) by 25% versus the 2019 baseline by 2025. The Group was able to maintain the clear drop in emissions that it achieved in the previous years even after the end of the restrictions caused by the pandemic. In addition, a pilot project for switching the company’s car fleet to e-mobility vehicles is helping to transition to green energy in its operations.
Social focus and corporate governance: sustainable structures strengthened
The Group also deliberately strengthened its social focus in the reporting period as part of reviewing its sustainability strategy. In addition to its “Employee’s Journey”, which is aimed at the own workforce, the Group is concentrating on “Diversity, Equity & Inclusion”, as well as on projects promoting access to education and infrastructure. By doing so, Talanx is providing a strategic framework for its social activities, most of which are organised on a local basis.
As an integral part of the Group’s business strategy, sustainability is also firmly embedded in its governance structures. Two Supervisory Board members have been appointed as sustainability experts. In parallel, the divisions are reinforcing the importance of sustainability by expanding their own ESG teams.
(1) In those countries in which thermal coal plays a particularly large role in the energy mix and where access to alternative energy sources remains insufficient, Talanx’s main focus is on accelerating the withdrawal from thermal coal and supporting the transition to renewable energy. In line with this, the Talanx Group will make a limited number of exceptions so as to permit insurance of new greenfield gas projects. These exceptions will be made on a case-by-case basis following an examination of the technical standards, provided that the project concerned supports the exit from thermal coal.
(2) In those countries in which thermal coal plays a particularly large role in the energy mix and where access to alternative energy sources remains insufficient, the Group may, after reviewing the technical standards, permit a limited number of exceptions in individual cases, based on an adjusted reduction path in order to support the transition away from thermal coal.
(3) The amount may change due to changes in interest rates and durations. The target was reached for the first time in mid-December 2022, but the figure as at the 31 December reporting date had dipped slightly below it.
Sustainability Report 2021 published – Talanx Group has stepped up its ESG goals and expanded its sustainability strategy
Sustainability goals expanded substantially in 2021 to include net zero emissions in asset management, underwriting and operations
Volume of sustainable investments reaches EUR 7.2 billion
New Board of Management remuneration system includes individual ESG contributions
Greater transparency thanks to publication of EU Taxonomy KPIs
Exclusion of Arctic further tightens investment and underwriting strategy
The Talanx Group tightened and enhanced its sustainability strategy last year. The measures and activities taken are described in the Group’s seventh sustainability report, which is published today. The main focus is on the net zero target that it intends to reach in its investment and underwriting activities by 2050, in line with the goals of the Paris Agreement on climate change. In addition, Talanx is planning to continue towards becoming one of the leading insurers of, and largest investors in, renewable energy sources. The Group also published Taxonomy KPIs in the reporting period in line with the EU Taxonomy, which formally entered into force in June 2020. This has introduced another fundamental criterion for transparency in investment and underwriting.
“We are feeling climate change in our business activities around the world – both in primary insurance and in reinsurance. Natural disasters have never impacted us more than in financial year 2021, when net losses in this area amounted to EUR 1.3 billion. This is why we want to use our sustainability strategy to help limit natural disasters resulting from climate change, and to support the transition to a low-carbon world”, said Torsten Leue, Chairman of the Board of Management of Talanx AG. “We are helping to make a sustainable future happen by including a range of different sustainability dimensions and ESG factors in our business strategy, and are constantly enhancing these. This is driving forward our cultural transformation and helping prepare us for the new normal – which will be shaped profoundly by the consequences of climate change.”
Responsible exit from fossil fuels
In the underwriting area, Talanx’s focus is on achieving net zero in its insurance portfolios by 2050 – a goal that will be used in time as a core performance indicator. However, the methodology needed to capture the relevant data in the insurance industry is currently still under development.
Talanx’s underwriting policy in the area of fossil fuels is subject to constant review and is being adjusted in line with the risks involved: from 2038 onwards, the Group will no longer insure business models that are based on coal or oil sands. A medium- to long-term time frame has been adopted for exiting fossil fuels, to permit this to be achieved responsibly. The Group’s underwriting strategy and activities are strongly influenced by its membership of the UN’s Principles of Sustainable Insurance (PSI) initiative. By signing up to this, Talanx has committed voluntarily to continuously improving the sustainability of its insurance business in line with the PSI Principles and to creating transparency about the progress it is making in this area.
Sustainable investments reach EUR 7.2 billion
In the asset management area, an intermediate milestone has been introduced on the way to achieving net zero by 2050: the Talanx Group is aiming to cut the carbon intensity of its liquid portfolios by 30 percent compared to the 2019 baseline by 2025. In addition, the Group has increased its sustainable investment volume to EUR 7.2 billion. This included making additional investments in renewable energy sources and other sustainable infrastructure projects, underlining the Group’s pioneering role in the transition to green energy.
One milestone reached during the reporting period was the issuance of the Group’s first green bond, which is aimed at financing and refinancing sustainable projects with a particular focus on renewable energy generation and low-energy residential and commercial real estate. The subordinated bond, which has a volume of EUR 500 million, was primarily issued to institutional investors in Germany and abroad; it was successfully placed on the market following a short subscription period in which it was oversubscribed by a factor of 3.5.
The Talanx Group’s sustainability approach in the asset management area is guided by the UN Principles for Responsible Investment (PRI) initiative, a network of international investors supported by the United Nations whose members are working towards a more sustainable global financial system.
Operations and corporate governance round off activities
Talanx achieved a further reduction in its carbon emissions from operations, which decline by 18 percent year-on-year during the reporting period. In addition, the Group has already reached one core goal of its sustainability activities. The Talanx Group’s operations in Germany – where 45 percent of its employees work – are climate-neutral. Talanx has set itself the goal of achieving net zero emissions for its worldwide operations by 2030.
In addition, Talanx has expanded fundamental sustainability criteria to its supplier management, where they are being systematically implemented through data capture, measurement and monitoring. ESG factors also play a key role in corporate management and underscore how seriously Talanx takes its activities. A new remuneration system at Board of Management level defines individual goals for each Board member in the areas of good governance and the contribution made to Talanx’s sustainability strategy.
Outlook for 2022: further enhancements to the sustainability strategy
What is more, additional initiatives will play a key role in the Group’s sustainability activities in the current year: For example, cover will no longer be provided on an individual risk basis for greenfield Arctic drilling. In asset management, issuers participating in such drilling projects are also being excluded from investment activities throughout the Group. In addition, the focus in Germany this year throughout the Group will be on developing a science-based reduction pathway in line with the 1.5°C goal, so as to further reduce greenhouse gas emissions in operations. Building on this, emissions are to be cut by 25 percent compared to the 2019 baseline by 2025 (so-called „Science-Based Target“) – a major milestone on the way to achieving the net zero target in operations in 2030.
Talanx Group sustainability reports