The contribution of the banking and insurance industry to climate change: a case study of carbon-neutral commodities
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Abstract
This article reviews the important international efforts to address climate change and protect biodiversity, with a particular focus on the key role played by the banking and insurance industry in this global challenge. From the Kyoto Protocol to the Paris Agreement, and including related initiatives such as ESG (Environmental, Social, and Governance) and TCFD (Task Force on Climate-related Financial Disclosures), the international community is consistently striving to advance carbon emissions management and climate risk mitigation. In this context, the banking and insurance industry is transforming from traditional financial support to a promoter of sustainable finance, committed to providing financial services in line with the Sustainable Development Goals of United Nations.
This paper further analyzes the specific actions of the insurance industry in responding to climate change. In addition to its investment efforts, the insurance industry is actually involved in carbon management and decarbonization through innovative products and services, such as solar insurance and carbon neutral commodities. In particular, this paper introduces in detail the design and implementation of a new type of insurance product, an indemnity insurance to cover the cost of accidental greenhouse gas emissions emphasizing its importance in compensating for losses caused by accidently increased carbon emissions and preventing the risk of carbon leakage.
Finally, this paper proposes the potential contribution of the insurance industry in promoting green procurement, emphasizing its role in promoting the greening of supply chains in the future. Overall, this paper calls for more insurance institutions to join the ranks of climate change response and points out the positive role and potential contribution that the insurance industry can play in this process.
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