The biggest number, the one that grabbed the most headlines and provoked the most debate, was the US$130trn (£95trn) pledged by the Glasgow Financial Alliance for Net Zero (GFANZ), a global coalition of 450 leading financial institutions across 45 countries led by former Governor of the Bank of England Mark Carney.

To support the deployment of this capital, GFANZ announced 24 major initiatives to strengthen the information, tools and markets needed for the financial system to support the transformation of the global economy to net zero by 2050.

Immediately this huge sum was announced the debate started about exactly what it means, with critics pointing out that it is neither directly promised new green solutions nor guaranteed to avoid investment in fossil fuels. Many campaigners were quick to argue that it lacked teeth since it has, as yet, no regulatory backing. However, it is a significant step forward from earlier pledges, marking a 25 fold increase over earlier commitments, while a growing number of financial regulators are introducing disclosure rules on sustainability.

Insurers were in Glasgow playing their part in Finance Day by formally launching the industry’s own Net Zero Alliance. This made its debut in July and is driven by the major European insurers with the founder members AXA (Chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re, and Zurich. Lloyd’s of London signed up to the Alliance on the eve of COP26.

These firms have committed to transition underwriting portfolios to net-zero greenhouse gas emissions by 2050. They will individually set science-based intermediate targets every five years and independently report on their progress publicly on an annual basis.

The key challenge for the industry as it leaves Glasgow will be to widen the engagement in that work, especially drawing in major insurers from other continents and ensuring that regulators and governments work with the industry, says Helen Faulkner, our Head of Insurance:

“The momentum behind the Net Zero Alliance is very impressive. It definitely has the potential to move the dial in the insurance industry’s response to climate change, especially when connected to other wider initiatives, such as Mark Carney’s impressive Glasgow Financial Alliance for Net Zero. It also needs engagement from the regulators, a theme that I raised in our recent Interconnectivity of Solutions thought leadership”.

Without this regulatory backing laggards could undermine the determination of major insurers to show they are serious about net zero, a point made by several insurance industry speakers at COP26 events yesterday.

Banks, pension funds and asset managers may be able to pledge large amounts of money and, along with insurers, re-orientate their huge investment portfolios to support the drive to net zero but the insurance industry also has important contributions to make as underwriters in understanding the risks posed by climate change, providing resilience and backing the transition away from fossil fuels.

These issues featured in many of the reports published yesterday, in particular one from the University of Cambridge Institute for Sustainability Leadership which has been working with another cross-industry initiative, Climatewise - an initiative in which DACB is involved.

This underlines the need for global policymakers to play their part by including financial inclusion and sustainable development priorities within insurance regulators’ mandates. It also highlights the need for public and private sector co-operation to create risk-sharing pools, arguing that neither can meet the financial challenges of climate change alone.

Transition has also come to the fore as insurers start tentatively to engage with climate change campaigners such as Insure Our Future which launched a new league table, ranking insurers’ responses to its calls to walk away from fossil fuels. 

Speaking in Glasgow, Lloyd’s chairman John Neal said insurers need to be able to support businesses transitioning away from fossil fuels but acknowledged this carries with it real challenges: “We must insure transition but we must be able to measure how it is being achieved.”

This need for transparency, measurability and accountability of transition is another area where the industry will need governments to step in. This is an area where recent announcements by the UK government on mandatory reporting of climate exposures by large firms are leading the world.