Climate Change

Climate protection needs technology – A plea for objectivity and greater efforts in Europe

Climate change is an established fact. The dramatic consequences of unchecked global warming have already been described in sufficient detail. Let’s therefore focus on how we can slow the pace of climate change as much as possible.

Here, in my opinion, there is one aspect that has been neglected in the discussions so far: the importance of new climate-friendly technologies and supporting their breakthrough. And it’s clear: we will not be able to change course on our own, we all need our politicians to take action.
Let’s remember how we were able to consign old-style refrigerators containing CFCs harmful to the ozone layer quite swiftly to history. At the time, it was politicians across the world – alarmed by scientific findings on the hole in the ozone layer and by the public debate – who made change happen. And they were successful! Ultimately, it was possible to phase out the use of these appliances because researchers had developed environmentally friendly and feasible alternatives to replace CFCs in many industrial sectors.
So this is the key. We need new technologies – for electricity generation, transport, energy storage and industrial production. Without them, the only way we could limit global warming would be by accepting lower living standards. Many people are making a valuable contribution by trying to live their lives in a more environmentally friendly way. Many companies are pursuing climate neutrality in their business operations. Munich Re achieved this target in 2015. But if we are honest, it will be impossible to decisively reduce carbon emissions worldwide in this way.
And no one would seriously argue that people in poorer countries should be denied the right to improved living standards purely in the interests of limiting climate change. After all, industrialised countries were responsible for the bulk of the emissions that have led to a 40% increase in carbon in the atmosphere since the start of the twentieth century. And a large measure of our prosperity is based on this.
It is encouraging to see how much the cost of generating electricity from renewable sources has dropped. Studies such as that conducted by Fraunhofer ISI on behalf of the Desertec Industrial Initiative (DII) have already demonstrated how renewable energies can effectively and efficiently replace fossil-fuel power stations: namely when power generation in suitable locations is networked internationally using the latest transmission technologies.
Change also requires the development of new technologies. There is currently an interesting debate around the term "Power to X". This refers to the conversion of energy from renewables into synthetically generated fuels such as hydrogen or methane. These could then be used in many economic sectors where there is currently no realistic alternative to the use of fossil fuels – such as air travel or petrochemicals. The same is true for fuel cells, where electricity is produced from hydrogen through a chemical reaction, with only water vapour being created in the process. Another fascinating idea is to anchor offshore wind facilities on floating foundations, which would allow them to be built in completely different locations than they are today. All three of these examples would, in principle, provide a constant source of energy from solar or wind power. But a great deal of progress is needed until we can be in that position.
Here at Munich Re, we want to help establish new climate-friendly technologies. Needless to say, one part of the strategy will be insurance solutions, whereby we shoulder a portion of what are often quite unique risks. We are already doing this today – for example, by offering performance guarantees for photovoltaic plants. But that is not enough. To propel change at a faster pace, we would like to make a concerted commitment to new power-generation technologies across all industries right from the start. 
The consequences of climate change will become expensive even if global warming is limited to under 2°C. Depending on the particular region and the type of event, weather disasters will be more extreme and occur more frequently. Missing the 2°C target would bring even more expensive and drastic challenges for society. So both governments and society need to have the courage to take bolder steps – such as by implementing a functioning, global emissions trading system that provides sufficiently strong price incentives for a gradual switch to non-fossil forms of energy.
Of all the different fossil fuels, coal is responsible for the bulk of carbon emissions. In statistical terms, four-fifths of coal reserves must remain in the ground if we are to achieve the 2°C target. It is also obvious that new coal-fired power stations with long operating lives are incompatible with this goal.
For that reason, Munich Re will not invest in either shares or bonds from companies that derive more than 30% of their revenues from coal. And in principle, in single-risk business – where we know all the details of the risk – from now on we will no longer insure new coal-fired power stations or coal mines in industrialised countries. There will be exceptions with individual case reviews – for example, for existing clients or in emerging markets. We are now working on policy criteria for these circumstances. So, for example, a country’s dependency on coal or a company’s climate strategy might play a role in our considerations. We want to work with our clients through this period of transition towards a more climate-friendly approach. But these will remain exceptions –  and will therefore only be few.
I believe that it is important to weigh up all such measures in terms of their effectiveness. Even if all the demands for withdrawal from coal production were to be met, this would by far not resolve the problem. For this reason, our climate activities will focus on solutions leading to new climate-friendly technologies. With a large number of technology companies and innovation drivers, there is an opportunity for Germany and Europe to be pioneers in this area. It’s our goal to make Munich Re part of it. This is how we will contribute to achieving the 2°C target.
© Munich Re
Here at Munich Re, we want to help establish new climate-friendly technologies.
Joachim Wenning
CEO Munich Re