Climate action

Swiss Re has been reporting climate-related information in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and providing insights into climate-related risks and opportunities in its investment portfolio since 2016.

Addressing the risks and opportunities arising from climate change, Swiss Re Asset Management has embedded its climate action approach into the Responsible Investing strategy in a structured manner. The climate action approach comprises four steps to align the portfolio with a 1.5°C world by 2050: set targets, take action, measure and report.

As part of its climate action approach and transition to a net-zero GHG emissions investment portfolio by 2050, Swiss Re sets intermediate targets every five years and regularly reports on progress. Targets were set in 2020 for 2025 in accordance with the AOA Target Setting Protocol (TSP) version 1.

The targets aspire to align Swiss Re’s investment portfolio with a 1.5°C world, and include financing transition, engagement, sub-portfolio and sector targets. Swiss Re considers the Financing transition and Engagement approaches as key in the global transition towards a low-carbon economy. Additionally, divestments and restrictions are used to manage the risk of stranded assets.

Climate-related risks can impact the value of Swiss Re’s investments and are therefore considered an important factor in the transition towards a low-carbon economy.

Transition risks may arise from climate change mitigation and adaptation requirements to limit the global temperature rise. Swiss Re considers these transition risks for the investment portfolio to be mainly relevant in the short to medium term.¹ The key transition risk faced by Swiss Re is that a changing policy and regulatory environment, such as increased taxes and/or new regulations, may irreversibly reduce asset values of particularly negatively exposed companies (stranded assets). Swiss Re also recognises that climate related litigation risk for companies remains elevated.

Emission reduction targets have been defined and implemented for the corporate bond and listed equity portfolio, as well as for the Swiss and German real estate portfolio. This can be perceived as a way to manage these risks to a certain extent.

Physical risks are relevant where assets are exposed to weather-related perils, such as Swiss Re´s infrastructure debt and real estate holdings. Most relevant in this context are acute, event-driven impacts due to weather-related perils, for example, tropical cyclones and floods. These can result in direct damage to assets or loss of revenue due to business interruption unless there is an insurance protection applied. For Swiss Re’s assets, physical risks are expected to mainly become relevant in the long term.

For more information, please refer to the Climate-related financial disclosures in 2023 Sustainability Report.

By monitoring portfolio GHG emissions and using climate scenario analysis, Swiss Re takes a structured approach to identify, assess and manage climate-related risks of its investment portfolio.

The table below provides a materiality overview of the identified risks faced by Swiss Re and how they are linked to the NGFS scenarios.¹

The financial materiality² of transition risks is estimated, according to the analysed scenarios, to be low to medium for its largest asset classes (ie corporate bonds and government bonds). Physical risks are currently considered low in terms of materiality due to both limited net exposure and their mainly long-term relevance.

For more details on Swiss Re Asset Management's scenario analysis, please refer to the Climate-related financial disclosures  in the 2023 Sustainability Report. pp. 78-79.

Swiss Re measures the carbon footprint of its corporate bond and listed equity portfolio (including ETFs, excluding strategic holdings) using market-accepted methodologies, resulting in weighted average carbon intensities ¹(WACI, revenue-based) and absolute financed CO₂e emissions ² (both metrics take Scope 1 and 2 CO₂e emissions ³ into account).

Carbon intensity is particularly useful for quantifying the carbon emissions of multi-asset portfolios and is a measure of choice for comparisons over time, between portfolios and against benchmarks. Swiss Re also sets its emission reduction targets based on this metric.

Asset-liability management is at the core of Swiss Re's investment approach, with the government bond portfolio primarily reflecting the profile of re/insurance liabilities. The regional composition of Swiss Re's government bond portfolio, and thus its carbon intensity, is therefore mainly driven by the regional composition of the underwriting portfolio. In 2023, the portfolio was less carbon intensive compared to the G20 due to its higher allocation to low carbon-intensive countries.

The analysis focuses on the combined internally managed Swiss and German portfolio, which made up 70% of the market value of the total direct real estate holdings per year-end 2023. The weighted average carbon intensity profile of this portfolio (WACI, m²-based taking annual Scope 1, 2 and 3 operational GHG emissions into account) is benchmarked against decarbonisation pathways reflecting 1.5°C global warming provided by the Carbon Risk Real Estate Monitor (CRREM) updated in 2023. ⁴ 

The CRREM pathways are in line with the Paris Agreement and are based on the breakdown of the global GHG budget into individual country and property type-specific carbon budgets. The absolute financed emissions of the portfolio amounted to
around 11 500 tonnes CO₂e in 2022.

The figure below on the left shows that its carbon intensity decreased by 12% relative to 2019, and is well below the decarbonisation pathway of 1.5°C. ⁵

For more in-depth information on our carbon reduction drivers and the temperature alignment assessment, please refer to Climate-related financial disclosures in 2023 Sustainability Report, page 83-86.