Lloyd’s outlines plans to increase green investments but stops short of full Paris Agreement alignment

Lloyds of London has faced pressure to improve its climate approach for several years

Launched today (29 July), the roadmap builds on the business’s first comprehensive environmental, social and governance (ESG) strategy, which was published late last year and detailed plans for ending investment in coal, oil sands and fossil fuel exploration in the Arctic.

It details plans for scaling up investment in solutions that will accelerate the low-carbon transition in three high-emitting sectors, namely energy, transport and heavy industry.

Offshore wind will be Lloyds’ priority in terms of clean energy. This is perhaps to be expected, given the UK Government’s commitment to host 40GW of offshore wind generation capacity by 2030. The roadmap also outlines plans for supporting nuclear power and blue and green hydrogen. Blue hydrogen is produced using natural gas, with the majority of emissions captured using man-made technologies, while green hydrogen involves splitting water using an electrolyser powered by renewable electricity.

As for transport, the roadmap details plans to help deliver the UK Government’s Transport Decarbonisation Plan, which sets a 2040 net-zero target for domestic aviation and a 2050 net-zero target for international aviation. The Plan prioritises sustainable aviation fuels (SAFs) over electric aircraft, as does Lloyds’ roadmap. Lloyds has additionally stated intentions to accelerate the uptake of future maritime fuels and more efficient ships, as well as electric vehicles (EVs).

On heavy industry, the roadmap outlines the potential of construction solutions such as offsite modular construction and low-carbon materials, as well as technologies that can be retrofitted to improve building energy efficiency.

Lloyd’s said in a statement that it has “engaged with a range of insurers, Lloyd’s market participants, brokers and corporates operating across energy, transport and broader industry to understand the pathway towards a lower carbon footprint and explore the challenges that require the insurance sector’s support”.

Time-bound targets for decarbonising Lloyds’ portfolios in these three sectors are notably absent from the document. These should be announced at a later date, the roadmap states. Before the end of 2021, Lloyds should publish a framework for accelerating and scaling investment in “climate-positive” solutions in developed and developing nations.

Aside from outlining technologies Lloyd’s seeks to back, the roadmap details three areas of action which Lloyds believes it – and the broader global insurance industry – should undertake to tackle the climate crisis. These are pioneering new risk transfer solutions for emerging green innovations; accelerating the low-carbon transition in high-emitting and hard-to-abate sectors by changing finance flows and collaborating.

To this latter point, the roadmap states that the global insurance industry has a capital pool of $30trn which, at present, is not allocated in such a way to accelerate the low-carbon transition. It also commits Lloyd’s to ensure that at least 5% of the Corporation of Lloyd’s Central Fund is allocated to impact investments by 2022.

Lloyds’ chairman Bruce Carnegie Brown said: “There is an ever-more pressing need for a coordinated global effort across industries to effect the monumental transformation needed to address the climate challenge. Lloyd’s is proud to play a role, together with the global insurance industry, in partnering with sectors to provide the risk management solutions and investment that will help enable and accelerate the necessary changes and drive action towards a more sustainable world.”

Lloyd’s has faced criticism from green groups for several years, because its members have insured controversial projects like the Adani coal mine in Australia and the Trans Mountain oil pipeline in Canada, which were both opposed by indigenous people’s groups.

These decisions were taken at a time when many other large insurers in Europe were exiting coal and tar sands – or at least reducing investment, insurance and reinsurance. Businesses like BNP Paribas, AXA and Zurich have taken this move.

Sarah George