Definity Financial Corporation – the parent company of Economical Insurance, Sonnet Insurance, Petline Insurance, and Family Insurance Solutions – recently announced its commitment to achieve net-zero emissions for both its operations and investments by 2040 or sooner.
To meet this commitment, the multi-channel property & casualty insurer has established and published interim targets to chart its progress. Definity’s priorities are: to offer insurance products and services that help reduce the impacts of climate change on clients and communities; to identify and manage climate-related risks across the enterprise; to reduce direct climate impacts of its operations; to manage the climate-related risks and opportunities for its investments; to advocate for a net-zero emissions future; and to disclose its progress alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Definity’s purpose statement is to “build a better world by helping clients and communities adapt and thrive”. This stems from Definity’s pre-IPO days when Economical, a 150-year-old mutual insurer, was focused on supporting Canadian communities with a ‘neighbours helping neighbours’ ethos.
“That legacy of the mutual insurer really influences our culture today,” said Brendan Seale, AVP & head of environment, social & governance (ESG) at Definity Financial Corporation. Seale joined Economical in July 2021 ahead of its historic demutualization in November 2021, and has since been building out the firm’s ESG function and climate strategy.
“It’s really a culmination and bringing together of a lot of good work that has been going on in the organization for quite some time,” he said. “With the establishment of Definity, we’ve really embraced that core purpose of building a better world by helping clients and communities adapt and thrive, and with that comes a commitment to sustainability and ESG.
“As a P&C insurer and a risk manager in the economy, we see this [climate change] as a defining issue of our time. It has profound implications for society, for our economy, and for human welfare. We want to play a supporting role in that transition to a net zero future and help to build resilience and adaptation capabilities in society as well.”
In its quest to reach net-zero emissions in its operations by 2040 or sooner, Definity will take an active approach to reducing the carbon intensity of its day-to-day business, including natural gas and electricity consumption in buildings, fleet vehicles and more. Its interim targets are to hit 30% reduction by 2025, and 50% reduction by 2030, relative to a 2019 baseline.
“During the pandemic, when our office buildings have been largely empty, our corporate services team has taken the opportunity to make some significant improvements to our facilities and improve their overall energy efficiency,” Seale told Insurance Business. “We’ve made improvements and upgrades to our heating, ventilation, air conditioning, and lighting systems – and [moving forwards] we’ll be looking to ensure that we secure renewable electricity in an equivalent amount of what we consume across Canada.
“We have a fleet of vehicles that are used by our claims adjusters to go out and assess damages and adjust our claims and so forth, so we’ll look to make that fleet of vehicles more fuel efficient and convert to electric vehicles over time. Those are within the Scope 1 and 2 emissions, which are the emissions and fuel combustion through your direct operations, and also the electricity that you purchase to run your facility. Then we’ll also start to look more broadly at our value chain initiatives, which are considered the Scope 3 emissions. That’s looking at things like the footprint of the goods and services that we purchase, employee travel and commuting, among other things.”
Definity is also targeting net-zero emissions from investments by 2040 or sooner, inclusive of emissions associated with listed equities and corporate bonds. The insurer will take an investment approach to reduce the greenhouse gas intensity of its portfolio, while seeking to maximize risk-adjusted returns. Its interim targets are to reach 30% reduction by 2025, and 65% reduction by 2030 on an intensity basis, relative to a 2020 baseline.
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A key part of Definity’s climate strategy is to provide insurance products and services that help reduce the impacts of climate change on clients and communities across Canada. This is something the insurer has been focused on for many years.
“One of the things we can do – and we already do - is reward our clients’ efforts to prevent losses in the first place,” said Seale. “If there are any improvements made to a property, for example, to help manage stormwater or to reduce the risk of flooding in a basement through the installation of a backwater flow valve, we take that into account in how we price the premiums for our clients. We can adjust and reward people for those sorts of activities. We also offer a green endorsement when there’s a total loss or a need for a repair on a property, where we’ll contribute some additional funds in the claims process if the customer is pursuing more sustainable outcomes in repair or rebuilding.”
Through Sonnet – Definity’s direct-to-consumer insurance brand – the firm has a partnership with the FLO electric vehicle charging network, whereby clients can receive a discount on their insurance if they’re part of that network.
“Those sorts of partnerships are things that we’ll be increasingly looking for in the future to really stimulate and attract and incentivize our clients and customers to make these sorts of improvements that will either help them to reduce their emissions or to mitigate climate related losses,” Seale explained. “And in our commercial underwriting activities, we really want to ensure that we’re a partner to our clients on their journey to a low carbon future. We will develop our underwriting strategy to support those objectives and really advocate and partner with our counterparties to achieve those shared goals.”
Definity encourages other organizations to develop ambitious strategies aligned to the goals of the Paris Agreement, to halve their emissions by 2030 and achieve net-zero emissions by 2050. It has stated 2040 (or sooner) as a reasonable timeframe to achieve its own net-zero ambitions after reviewing the nature of its footprint and its investment portfolio as a financial services company.
“Speed is of the essence with climate change, to reduce emissions as quickly as we possibly can to avoid the worst impacts of climate change,” Seale emphasized. “The Paris Agreement objectives are really there for us to avoid the worst impacts of climate change that are anticipated. To the extent that we can go quicker and achieve these objectives sooner, that’s a positive, and we would encourage all actors to move as quickly as they can to decarbonize their operations as soon as possible.”
