Government and consumer responses to climate change also affect the insurance industry. The transition to a low-carbon future, while necessary, introduces considerable investment risk. Insurers are therefore doubly motivated to prepare for climate-related risks and to do their part in addressing the root problem.

Insurance companies including Co-operators, Definity, and Munich Re have set ambitious environmental goals and are already bullfrogpowering their operations with 100% green electricity. These insurers also believe they have a bigger role to play by helping their clients and society at large prepare for and mitigate climate change.

What role should the insurance industry play in addressing climate change?

Insurance has wide-ranging influence, and insurance companies can help decarbonize much more than their own operations.

Chad Park, Vice President of Sustainability & Citizenship at Co-operators, notes that as climate risks increase, people in our communities – especially those who are marginalized or vulnerable – are bearing the financial, social, and emotional cost of climate catastrophes. “As insurers, financial protection against risk is core to our purpose,” he said. “But we can go further. We can increase our efforts to prevent losses by increasing risk awareness and investing in climate adaptation.”

Brendan Seale, AVP and Head of Environment, Social & Governance at Definity, encourages cross-sector collaboration on climate issues. “The insurance industry is uniquely positioned – and has a vested interest – to address human contributions to climate change,” he said. “In addition to reducing their own carbon emissions, insurance companies can influence and collaborate with their suppliers and policyholders to reduce emissions and be better prepared to thrive in an increasingly unstable climate future.”

Silke Jolowicz, Head of Sustainability at Munich Re, highlights the key role that insurance can play in identifying climate risks and opportunities, and then developing solutions for loss minimization. “Slowing the pace of climate change requires new technologies for power generation, transportation, energy storage, and industrial production,” she said. “It’s important to create insurance solutions for such technologies, smoothing the path to market entry.”

Thanks to their advanced understanding of risk and their close relationships with clients, insurers are well positioned to help individuals and other industries reduce their carbon footprints and increase climate resilience. New insurance products and green investments can also support advancements in cleantech, allowing insurers to have a far-reaching impact on climate.

Helping clients adopt more sustainable practices

Insurers benefit from helping their clients understand and minimize their climate risk, making them a powerful driving force for more sustainable decisions at the corporate and personal level.

Jolowicz reminds us that insurance companies have a wealth of information that can be used in evaluating risk. “Education and knowledge are key, and partnering with an insurance company can help companies fully understand their exposure to climate related risk and how they could evolve because of climate change,” she said. “For instance, Munich Re has a product called the Location Risk Intelligence Platform. It is a comprehensive software solution to analyse and to manage physical risks of natural hazards and climate change, based on the largest and most comprehensive expertise worldwide gained from 141 years of risk assessment and management, as well as 15 years of continuous product development.”

Co-operators is working with its partners to build back better, keeping resiliency and sustainability in mind before and after a disaster occurs. “For example, we work with contractors who rebuild damaged homes with more sustainable building materials,” Park said. “We can also reclaim waste materials like shingles or drywall to be part of the circular economy.”

Definity offers financial incentives that motivate and help clients to make environmentally friendly choices. “We have green endorsements for property claimants that provide additional funds to implement more climate resilient or environmentally friendly solutions,” Seale said. They also offer additional coverage limits to commercial clients that meet certain environmental criteria.

By working with clients to educate them about climate risks and incentivize sustainable decisions, insurers can facilitate a wide variety of green practices.

Supporting new climate initiatives

Insurance companies have a massive amount of capital at their disposal, and the investments they choose can support our collective efforts to slow climate change.

Definity recently committed to achieve net-zero emissions for their operations and investments by 2040 or sooner. “Choosing green energy from Bullfrog Power enables us to clearly demonstrate our commitment to achieving an operational goal, while providing our financial support for the ongoing development of a clean electricity system across Canada,” Seale said. On the investment side, Definity has set interim targets and will reduce the greenhouse gas intensity of their holdings over time.

Munich Re sees responsible investments that reconcile economic, environmental, and social requirements as the basis of a successful business strategy. “Because our business model as an insurer has a long-term focus, sustainability criteria in investment play a key, strategic role,” Jolowicz said. Increasingly, investments that prioritize environmental, social, and governance criteria are seen as a way to promote public good and limit investment risk from climate hazards and more.

For Co-operators, an investment portfolio is a catalyst for a more sustainable society. “We exist to provide financial security for Canadians and our communities,” Park affirmed. “Anything that threatens that security – whether climate change, social inequality, mental or physical health challenges, or food insecurity – we are committed to proactively addressing.” Co-operators puts more than 21% of their invested assets, more than $2.6 billion, into impact investments that aim to solve pressing environmental and social challenges. Their target is to dedicate 60% of their portfolio to impact investments and investments that support the transition to a resilient, sustainable, low-emissions society by 2030.

There is vast potential for financial institutions like insurers to choose investments that make communities more sustainable, healthier, and more resilient in the face of climate change.

Insurance with impact

Sustainability-focused insurance companies have the ability and the motivation to educate their clients about environmental risks, encourage and incentivize greener practices across industries, and fund new climate solutions through impact investments.

Companies like Munich Re, Co-operators, and Definity are setting positive examples for the insurance industry by driving climate solutions for a better tomorrow while providing financial security for communities today.

Co-operators, Definity, and Munich Re shrink their carbon footprints with Bullfrog Power’s green energy. Click here to learn more.

The post How insurance companies can move the needle on climate change appeared first on Corporate Knights.

Canada’s first Emissions Reductions Plan calls for net-zero electricity by 2035, but industry experts warn that the current federal budget won’t get us there. Fortunately, the stage is set for the business community to accelerate the renewable energy transition and secure favourable electricity rates in the process.

Alberta has Canada’s most carbon-intensive grid, as well as the nation’s only deregulated electricity market. These two factors, along with abundant wind and solar resources, have made the province a prime destination for renewable electricity developers and corporate buyers.

Bullfrog Power, Canada’s leading green energy provider, recently formed a buyers’ group with RBC and Shopify to purchase energy from the Rattlesnake Ridge Wind Power Project in Alberta. The three companies signed power purchase agreements (PPAs) with Berkshire Hathaway Energy Canada to offtake a combined 90,000 MWh of renewable electricity per year. The wind project was completed in June, and is now powering the equivalent of 78,000 homes.

When signing a PPA, buyers provide long-term price certainty to developers for a renewable energy project that hasn’t been built yet. This helps developers secure financing for the new wind or solar farm. Once the project is complete, the buyer procures renewable electricity and has insulation against rising or volatile energy prices.

“PPAs are an important tool for companies looking to meet their renewable energy commitments and have a positive impact on Canada’s grid, all while minding the bottom line,” said Suha Jethalal, President of Bullfrog Power.

Canadian power purchase agreements are only possible in Alberta’s deregulated market, but out-of-province companies can still take advantage of these deals through a virtual PPA, which is a financial contract for renewable energy certificates. This approach is attractive to buyers that want to maximize the emissions reductions from their green electricity procurement and, depending on electricity rates, possibly make a profit on the deal.

The favourable economics of a PPA and mounting public pressure for companies to reduce emissions are positioning businesses as a driving factor in Alberta’s green energy transition.

Corporate power purchase agreements are already facilitating significant renewable growth, and they’re gaining popularity exponentially. In 2021 alone, Canadian organizations contracted 1,262 MW of wind and solar deals according to Business Renewables Centre-Canada. For context, Alberta’s largest natural gas-fueled power plant, the Shepard Energy Centre, has a capacity of 800 MW.

“[PPAs] help bring more renewables online and have contributed to reducing emissions from Canada’s grid much faster than could otherwise have been accomplished,” says Nagwan Al-Guneid, Director of Business Renewables Centre-Canada. “Not only that, but they are an economic win too: private renewables investment will support $3.75 billion in construction by 2023 and nearly 4,500 jobs that come with it.”

PPAs bring environmental, financial, and brand benefits to the table, but there are some drawbacks. These are complex, long-term deals that are best suited for large power users with some energy expertise. Your local small business won’t be signing a PPA any time soon, and even large organizations may need some help.

Through our PPA solutions, Bullfrog Power helps companies like Shopify navigate the entire process, from identifying a project to reaching a signed PPA. We advise our clients on choosing a renewable project that fits their needs, mitigating financial risk, and assembling buyers’ groups.

“Bullfrog Power provided excellent support to Shopify as we identified and selected a high impact renewable energy project for our first PPA,” said Stacy Kauk, Head of Sustainability at Shopify.

Bullfrog also recently advised MEGlobal Canada ULC on signing a power purchase agreement to offtake 126 MW from Capital Power’s Whitla Wind farm. This agreement is one of the largest Canadian PPAs to date.

When embarking on a complicated deal like a PPA, companies have a lot to gain by working together. Forming a buyers’ group like the one Shopify, RBC, and Bullfrog Power used to procure renewable energy from the Rattlesnake Ridge wind facility is an advantageous strategy – particularly for Canadian companies that have a smaller energy load than the tech giants that dominate the U.S. PPA market.

Buyers’ groups allow companies to stack demand for larger energy projects, take advantage of economies of scale, and share knowledge.

“The power of the buyers’ partnership formed between RBC, Shopify and Bullfrog Power improved our access to large-scale energy projects. Each of our respective organizations increased the impact of our contributions to new renewable energy sources,” said Alex Boulos, VP Climate at RBC. “And RBC’s knowledge of the Alberta utility market and experience in power purchase agreements were key to making the deal successful.”

With this PPA, Bullfrog Power, Shopify, and RBC hope to set an example for other Canadian companies. “No one can solve the climate crisis on their own,” said Mrs. Jethalal. “We need to collaborate and pool our strengths if we’re going to transform our energy systems for the better. Bringing a new wind or solar farm online with a PPA is a perfect example of what we can accomplish together.”

Click here to learn more about Bullfrog Power’s PPA solutions.

The post Canadian companies can, and should, work together to drive renewable growth appeared first on Corporate Knights.