Trump’s denial of climate change for the economy and insurance

27 Januar, 2025 | Aktuell Allgemein

Trump's denial of climate change and its consequences: Storms and severe weather also reach Mar-a-Lago in Florida.

One of the first official acts of the 47th President of the United States, Donald J. Trump, was to withdraw from the Paris climate agreement. Even before his election, he had repeatedly stated that climate protection was not one of his priorities. Despite scientific findings on the causes of global warming, Trump not only questions them, but sees them as deliberate deception. The creation of sustainable framework conditions, as legally enshrined by the US Environmental Protection Agency (EPA), is also in jeopardy.

The Paris Agreement aims to limit global warming to below two degrees Celsius above pre-industrial levels, ideally to 1.5 degrees. The goal is to mitigate the effects of severe heat waves, droughts, forest fires and extreme weather events. The withdrawal of the USA, which is considered to be the second largest emitter of greenhouse gases after China and the largest economy in the world, means that it will no longer present plans to reduce its CO2 emissions. Financial support for vulnerable and poorer countries is also at risk.

Trump’s withdrawal from the Paris climate agreement

However, the cancellation will not take place immediately; instead, the USA will withdraw from the agreement after a one-year period. Although this cancellation is generally seen as a great pity, all the other countries, especially the EU and even China, want to remain part of it. This could give Switzerland a more important role in achieving the goals of the Paris Agreement. While the International Energy Agency expects half of the world’s electricity needs to be met by renewables by 2030, analysts at the Rhodium Group expect a reduction of no more than 40 per cent.

The reason for this is that Trump wants to abolish, among other things, emission requirements for the energy sector and for cars, as well as tax incentives for clean technologies. Consequently, significant coal capacities remain on the grid and the expansion of renewable energies slows down, while the share of natural gas increases. The comparison portal Climate Action Tracker estimated the possible Trump effect at 0.04 degrees by the end of the century. However, the figure only applies if the US changes course.

The climate crisis is a reality

The climate crisis is not a distant threat, but is already manifesting itself in the form of hurricanes intensified by global warming and droughts that trigger devastating wildfires. Unchecked rising sea levels and flooding threaten entire landscapes, while extreme heat waves fundamentally change our daily lives. 2024 was the first year in which global warming exceeded 1.5 degrees since records began. This is mainly due to high emissions of man-made greenhouse gases.

Solutions from insurers for sustainability

To minimise investment risk in sustainable projects such as recycling plants or wind farms, some insurers have developed innovative solutions. These approaches not only reduce costs, but also promote a faster transition to net-zero emissions. The study by Sustainable Switzerland on behalf of the Boston Consulting Group shows that when private individuals know that their investment is not at risk from potential risks, they are more willing to invest in houses or other assets. The same applies to entrepreneurs who want to implement new business ideas if they know that they will not be ruined by unforeseen events.

The business model of the insurance industry is based on the principle of solidarity, which goes beyond mere risk protection. By investing in sustainable projects and technologies, insurance companies can exert a considerable influence on ecological and social transformation. Environmental, social and governance (ESG) criteria are becoming increasingly important in this context, as they help to better assess risks from environmental damage and extreme weather events.

Insurers integrate sustainability criteria

More and more insurance companies, including in Switzerland, are integrating sustainability criteria into their policies and products. The sustainability report of Zielke Rating GmbH shows the results of the 2022 study, in which 21 insurers from various European countries were examined in the areas of environmental responsibility, social commitment and corporate governance. The AXA Group took first place with 5.30 points, followed by the Zurich Insurance Group with 5.28 points and Baloise and Helvetia with 4.81 points each.