Munich Re sets out its climate strategy and handling of the coal sector
In July 2018, the Board of Management approved the targeted further development of Munich Re’s climate change activities for decarbonisation. The primary focus is to develop solutions that make it possible to insure risks associated with new technologies, which by their very nature are high risk. These solutions will make it possible to invest in and/or use future technologies, thereby helping to prevent greenhouse gas emissions (“enabling”).
Power2X projects could potentially contribute a lot to this energy transformation. Electricity from renewable sources is converted into synthetic fuels such as hydrogen, methane or methanol, which can be used as carbon-neutral alternatives to fossil fuels or in industrial processes. In this area, we can contribute our risk expertise and develop tailor-made insurance solutions, thereby making these projects more financially viable.
Examples of insurance solutions for new technologies that have already been implemented are products such as performance guarantee covers for solar module manufacturers or the assumption of political risks associated with renewable energy projects in Africa, which we support via the new African Energy Guarantee Facility (AEGF) in cooperation with the European Investment Bank (EIB).
We are reinforcing the “enabling” strategy to tackle climate change with our decision not to insure any new coal-fired power plants or coal mines, and not to invest in companies that generate more than 30% of their revenues from coal extraction or coal-fired power generation. Any such remaining investments will be sold by the end of 2018.
In terms of insurance business, this Board resolution means that Munich Re will no longer insure any new constructions of coal-fired power plants or coal mines as single risks in developed countries or in the majority of emerging markets. There may be a few exceptions in countries where a significant proportion of the population (over 10%) does not yet have access to electricity. For these lower-income countries, access to cheap (direct cost) energy sources is essential for their further economic development. They should not bear the cost of the energy transformation, particularly as they have barely contributed to climate change. Cases in these countries will be reviewed using clearly defined criteria, such as a country’s dependence on coal, its natural endowment of renewable resources, the climate strategy of the company or country concerned, and the technical standards applied.