Introduction

Against a backdrop of looming risks created by global warming, European and UK insurers have established leadership in fighting climate change through active investment strategy. Even with progress, the challenge remains real: global greenhouse gas emissions remain at record highs, in turn threatening the Paris Agreement’s goals. Insurers have shown leadership in this area, and rank among the most sophisticated when it comes to incorporating sustainable considerations into portfolios, with three quarters recognising the importance of supporting the global transition to a low-carbon economy. The industry continues to debate effective response and implementation.

The key question increasingly asked is: How do insurers decarbonise in a way that is both effective and credible? In the majority, we see insurers choosing between two different pathways.

Addressing changing risks: Insurer approaches to climate investing

Insurers, as long-term investors, uphold a crucial role in advancing the shift toward a low-carbon economy. The industry’s commitment to responsible investment is driven by the significant risks that climate change and an uncoordinated transition pose to both their operations and policyholders.

Assets are material: In the UK, the insurance sector oversees investments worth £1.8 trillion. Across Europe, insurers collectively invest more than €10.6 trillion in the EU economy. So are the costs: Aon’s Climate and Catastrophe Insight 2025 report highlights that last year, the direct economic losses from natural disasters reached $380 billion, which is 22% higher than the average for the 21st century.

The concern is real: Global greenhouse gas emissions remain at record highs, putting mounting pressure on the Paris Agreement’s well below 2°C goal. The UN Environment Programme’s 2024 Emissions Gap Report warns that current global policies put us on track for 2.6–3.1 °C of warming by the end of the century. At the same time, the energy transition is gaining momentum. Global investment in clean energy has grown1, supported by technological advances and large-scale deployment. Progress is underway, but the pace must accelerate substantially to keep climate targets within reach.

Against this backdrop, insurers rank among the most sophisticated investors when it comes to incorporating sustainable considerations into their portfolios, with three quarters recognising the importance of supporting the global transition to a low-carbon economy.