Climeworks invited Mischa Repmann, Senior Sustainability Risk Manager at Swiss Re, to discuss the critical role that the insurance industry plays in scaling carbon removal. Why are insurers particularly well-positioned to be a leader in advancing solutions like direct air capture and storage (DAC+S)? What challenges did Swiss Re face on its own carbon removal journey? And what does their commitment mean for Climeworks?
Read through the highlights of the conversation between Mischa and our corporate partnerships manager Laurent Müller, which was moderated by Robert Höglund.
(1) Insurers can seize more opportunities in the carbon removal industry than other players
Insurers can follow three paths in parallel to bring a solution like DAC+S to scale through buying, financing, and de-risking. Swiss Re engaged as a buyer early on to send a strong signal to the market that long-term demand for high-quality carbon removal exists, became an investor, and is currently working on how to become an insurer in the carbon removal value chain.
Swiss Re committed to achieving net-zero emissions in their operations by 2030 and group-wide net-zero emissions by 2050. To work toward this goal, they follow their strategy “Do our best, remove the rest”: Swiss Re continues to reduce emissions as much as possible while steadily increasing their carbon removal purchases to neutralize unavoidable CO₂ emissions. After a comprehensive due diligence process, they chose Climeworks as a carbon removal supplier in 2021. The 10-year agreement worth 10 USD million was the first of its kind and set a new standard in the industry for multi-year agreements, demonstrating Swiss Re’s climate leadership.
As institutional investors, insurers can also directly invest in carbon removal on top of purchasing a service. Here, they may face similar challenges as other types of investors when entering a new industry. According to Mischa, becoming a buyer and credible off-taker of Climeworks’ service early on helped to bring Swiss Re’s investors and underwriters to the same table to access such a new asset class and risk pools. In April 2022, Swiss Re participated in the funding round with which Climeworks raised 650 USD million in total.
“The fact that this procurement and investment was coming from an insurance strengthened the credibility of the solution we’ve developed because it was studied, tested, and checked by an insurance.” — Laurent Müller
Throughout the value chain of technology-based and nature-based carbon removal solutions, there are different insurance opportunities. Insurers can de-risk a solution through classical covers for property damage, engineering, or transport, for example. As Mischa explained, the industries and processes within this value chain in many ways resemble the typical underwriting that an insurance already does.
Many can buy and invest in carbon removal, but only insurers can also de-risk — which is why they are perfectly positioned to be at the forefront of scaling the carbon removal industry.
(2) An internal carbon tax can be a key tool to guarantee funding over multiple years
Laurent underlined that Swiss Re’s commitment has already inspired several other insurers to take action, but one key question that arises here is funding: how did Swiss Re manage to purchase carbon removal on top of their emissions reductions efforts?
They introduced a carbon steering levy, an internal carbon tax, as a funding scheme. Since it was introduced, it has risen to 112 USD per ton of CO₂ and will further increase to 200 USD per ton of CO₂ by 2030. Both Mischa and Laurent highlighted that this is an extremely effective tool: it guarantees funding over multiple years versus a one-off budget, it represents a big incentive to further reduce emissions, and it prepares the business model of any company for future taxes on CO₂.
“It’s one thing to excite somebody about a new topic and then ask for a one-off budget and then go and spend it. It’s another thing to do that over 10 years.” — Mischa Repmann
(3) With persistence and dedication, sustainability leaders can open doors
On top of our speakers’ recommendation to cover the question of funding at the start — for example through a carbon tax — there’s another major takeaway that can be drawn from Swiss Re’s, and in particular Mischa’s experience. It proves that company-internal resistance to new solutions can be overcome with the conviction and dedication of an inspiring sustainability team. The start of the carbon removal engagement from within Swiss Re’s operations had a ripple effect into the business and sparked the interest of the senior management.
“There are resistances all along the way but you shouldn’t give up. I always thought you would run into closed doors but that’s not the case in a pioneering company like Swiss Re — you just have to know how to open those doors.” — Mischa Repmann
In order to scale carbon removal solutions like DAC+S to the required gigaton capacities by 2050, many more pioneering companies like Swiss Re are needed to create additional market demand. In particular long-term demand is crucial for DAC companies like Climeworks to generate cash flow, pay for the development of the plants, and support growth-planning. The groundbreaking on our second DAC+S facility in Iceland, called “Mammoth”, is a tangible example here: Mammoth capitalizes on dynamic market demand and represents a demonstrable step in our scale-up roadmap to gigaton capacity.
All industries need to act to reduce their emissions to as close to zero as possible and permanently remove their unavoidable CO₂ emissions. However, the insurance business is clearly in a position to pave and lead the way, as our conversation with Mischa has shown.
“Ask yourself how much you’re willing to pay and then ask yourself how you’re going to deploy this money most meaningfully — even if it covers just 1% of your emissions in the beginning.” — Mischa Repmann
Interested to learn more?
Learn how to assess the quality of carbon removal solutions in: Transparency in the carbon removal market.
Discover underground carbon dioxide storage by reading: What is underground mineralization of CO₂?
Check out our insights on: How carbon removal solutions fight climate change.