Feeling the heat

In 2007, Allianz and the World Wide Fund for Nature (WWF) joined forces in a three-year global partnership that aims to raise Allianz's standing and behavior in respect to climate change issues and initiatives. The partnership will enable Allianz to achieve its goal to become a "thought and action leader" on climate change in the financial services industry.

As an insurer, Allianz is already feeling the heat: insurance claims from natural catastrophes have risen in the last decade and natural catastrophe claim forecasts are even gloomier for the future. On the asset management side, Allianz needs to ensure it invests its assets in such a way as to not be impacted by the negative effects from climate change. 

"Our objective at the WWF is to help Allianz to actively address the challenges that climate change and a low-carbon economy imply and to assist Allianz in reaching its climate-related business goals," states Janitzek. "We are now at the mid-way point of our partnership. Many initiatives, such as the company-wide commitment to reduce CO2 levels, the main cause of man-made climate change, by 20 percent by 2012 are already underway." 

Allianz and the WWF are addressing this on three different levels: reducing the CO2-emissions stemming from Allianz operations (for example, buildings, paper use, business travel); analyzing the CO2-emissions that Allianz "owns" through its investments in other companies and, lastly, exploring the possibility Allianz has to incentivize climate-friendly behavior in its customers through developing green products.

Timmo Janitzek: "The risks of CO2-emissions should be integrated into the standard investment strategy"

"Allianz has to be concerned with both its direct and indirect footprint," says Michael Anthony from Allianz4Good, who manages the WWF partnership on behalf of Allianz. While direct emissions of buildings and operations in the financial industry are relatively small compared, for example, to similar scale operations in the manufacturing sector, the climate impact of financial and investments policies and products of the financial sector can be immense. "As one of the world's largest investors, Allianz's investment behavior can have a significant impact on carbon emissions, provided the risks of these CO2-emissions are integrated into the standard investment strategy of Allianz," says Janitzek.

However, it's not just what companies do; external forces are also shaping how industries are responding to climate change: "Governments are increasingly regulating the emissions of CO2. This can bring with it dire financial consequences for companies which will, as a result, need to change their business models. As an investor, Allianz can be impacted by that," cautions Janitzek.

According to the WWF, one key barrier to integrating CO2-risks in the mainstream investment decision is the lack of viable and agreed methodology for working out the actual indirect footprint of investment activities. Allianz and WWF are working to pursue the development and implementation of such a methodology. "This is the huge opportunity in our partnership with Allianz, which will lead to a greater understanding of the CO2-risk dimensions of investments and the development of tools which factor in carbon intensity and can transform the whole financial sector's response to climate change," notes Janitzek.

Michael Anthony considers the broader implications of climate change: "We have to understand which are the new green technologies that need investment today, and which industry sectors are set to lose from climate change tomorrow – and appreciate what all this will mean for Allianz as one of the world's largest investors," he says. "Our research with the WWF steers us towards gaining a better understanding of the implications of climate change."

Another workstream of the Allianz-WWF climate change task force is looking into green product development, exploring how Allianz can develop innovative insurance products and tariffs that will motivate customers to behave in a climate-friendly manner. "For that, one possible approach is to prove the hypothesis that an 'environment-friendly' customer poses a smaller insurance risk for Allianz," says Janitzek. "For example, if I switch to a more climate-friendly car and take the train whenever possible, that implies that when I get behind the wheel of a car, I'm a more careful driver."

Allianz and the WWF are currently working with the Hochschule St. Gallen University in Switzerland to research the topic of the "sustainable" environment-friendly customer. Following the outcome of the research – expected by year's end – Allianz will have a more comprehensive profile of the sustainable customer and be better able to gauge how it might convince customers to adopt low-carbon emission behavior, and thus promote a "green" insurance industry. One way to do this is to reward low CO2-emissions by linking car insurance costs with CO2-emissions – an approach which was announced by Michael Diekmann in 2007.

While researching and explaining the economic impacts of climate change is important for Allianz, its employees, business partners, customers and the public, making people feel and understand how the climate actually works is of equal value. To this end, the Allianz Foundation for North America and the WWF worked with young people in the Southeast of the U.S. "We developed an educational program for young people displaced by Hurricane Katrina," says Janitzek. The "Southeast Climate Witness Program" gave youths whose families were impacted by Hurricane Katrina an opportunity to learn more about the science of climate change, including how the Southeastern U.S. is particularly vulnerable in that respect, and how climate change is affecting their own lives. Students presented their findings at the end of the learning cycle to the U.S. Congress at a youth summit in Washington D.C. in July 2008.

"The economic costs of climate change are likely to be very high," concludes Janitzek. Within the partnership, Allianz and the WWF ultimately aim to establish role models and options for the entire financial sector and define the means required to make the transition from a high-carbon to a low-carbon economy. "This is a daunting challenge, but no less so than those each of us will face in the future."


This article first appeared in the employee magazine "Allianz Journal".



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