Strategy

Disclosure Requirement E1-1 – Transition plan for climate change mitigation

In the reporting year 2024, VIG published its first transition plan for climate change mitigation, which serves to define and implement the strategic actions and targets that will support the transformation towards a more sustainable business. It currently focuses on the following areas:

• Corporate portfolio in underwriting

• Portfolio of corporate bonds and equities and other non-fixed-interest securities in asset management

• Real estate portfolio in asset management

• Internal operations

For financed and insured Scope 3 emissions, the focus is therefore on selected portfolios, which are described in detail in chapter ESRS E1-4 “Targets related to climate change mitigation and adaptation”.

The transition plan for climate change mitigation includes the insurance companies of VIG as well as, for asset management, the pension funds’ own investments. All companies that are essential for the insurance business (e.g. claims management) are also taken into account for internal operations. Further details on the scope of the transition plan for climate change mitigation can be found in chapter ESRS E1-4 “Targets related to climate change mitigation and adaptation”.

With its transition plan for climate change mitigation, VIG aims to reduce the absolute greenhouse gas emissions in Scope 1, 2 and 3 in line with the Paris Agreement (for details on the real estate portfolio, see chapter ESRS E1-4 “Targets related to climate change mitigation and adaptation”). To this end, VIG has elected to follow a scientifically based net-zero path as a reference for its target and has chosen the Net Zero 2050 scenario developed by the Network for Greening the Financial System (NGFS), which is in line with the target of limiting global warming to 1.5°C through strict climate guidelines and technological innovations. It takes into account measures such as the decarbonisation of the energy sector, increased energy efficiency and the development of new technologies to combat emissions that are difficult to reduce. It is also based on the latest scientific evidence and represents a reduction path for absolute greenhouse gas emissions without distinguishing between regions or industries. For this reason, VIG applies the reduction targets derived from the scenario uniformly to the selected portfolios listed above (excl. Real estate portfolio), which are consolidated at Group level, in order to ensure that the targets are implemented in accordance with science-based targets.

The reduction targets for the selected portfolios apply at the Group level and are assigned to the individual Group companies. The greenhouse gas emissions from the base year 2023 serve as a starting point for measuring progress. Based on the selected scenario, the path to net zero by 2050 for selected portfolios requires VIG to achieve an absolute reduction in greenhouse gas emissions of approximately 30% by 2030 (starting from the base year 2023). The specific reference target values resulting from this reduction for each sphere of impact are presented in chapter ESRS E1-4 “Targets related to climate change mitigation and adaptation”.

VIG’s real estate portfolio was included in the transition plan for climate change mitigation in the reporting year. Due to insufficient data quality in some cases and a lack of control options, around 65% of the investment volume from the real estate portfolio is currently covered in the transition plan for climate change mitigation. For these real estate investments, VIG has chosen to use the CRREM pathways for the target-setting process, as these are more specific than the NGFS scenarios. The pathways set annual decarbonisation targets for different types of real estate use per country and include both carbon (greenhouse gas) and energy consumption intensity pathways (EUI), so that targets can be derived from individual assets through to the entire portfolio. The CRREM pathways take into account national forecasts for both the energy mix and emission factors. The decarbonisation pathways thus reflect the emission and energy intensity values that buildings must meet in order to be in line with a warming scenario of 1.5°C. Updates are usually made every three years to reflect new scientific data, regulatory changes and updated forecasts for energy consumption, emissions and technological progress.

Emissions in the real estate portfolio are measured and relevant targets are set in accordance with the CRREM pathway on the basis of intensities (kg CO₂e/m²). Within the scope of a feasibility study, VIG has set itself the target of reducing the emission intensity by 30% by 2030 (base year 2023). The CRREM pathway was thus used as a reference pathway for VIG’s real estate portfolio – the reduction specified by CRREM for the 1.5-degree target is not achieved with the target set.

For each sphere of impact, key decarbonisation levers have been identified which serve as a guidance. They form the framework for tangible actions, both at the level of the individual VIG companies in the transition plan and at the investment level (e.g. investment security and/or issuer), and are described in detail in chapter ESRS E1-3 “Actions and resources in relation to climate change policies”.

With regard to the quantification of investments and financial resources that support the implementation of the transition plan for climate change mitigation, the collection and analysis of the relevant data is still in progress. Disclosure of this information is planned for future reporting periods.

No significant locked-in greenhouse gas emissions have been identified that could adversely affect or slow down the achievement of the climate change targets set out in the transition plan for climate change mitigation as, in the context of the business model, the material climate-relevant impacts of VIG result primarily from the financed and insured Scope 3 emissions in category 15 in accordance with the Greenhouse Gas Protocol (GHG Protocol) and, to a lesser extent, from internal operations, and concrete decarbonisation actions are already addressed for these in the transition plan for climate change mitigation.

The transition plan for climate change mitigation is based on VIG’s sustainability programme and is of central importance for its business activities. It is embedded in the entire governance structure of VIG. This means that targets, activities, progress and updates are developed in the same way as all other business-related actions and subsequently addressed on a regular basis by the respective local managing board and supervisory board. The interaction between local companies and the VIG Holding departments with regard to the implementation of the transition plan for climate change mitigation at the local level takes place on a consultation and dialogue basis. All activities relating to the integration of Group targets at the level of the companies and to the measurement and control of results and progress, including any resulting adjustments, are primarily the responsibility of the local managing boards of the companies and consequently also of the VIG Holding Managing Board or, subordinately the respective departments.

Overall responsibility for sustainability matters, including the transition plan for climate change mitigation and its implementation, lies with the VIG Holding Managing Board. The transition plan for climate change mitigation was approved by the Managing Board in January 2025. The Group-wide monitoring of implementation and target achievement is carried out on the part of VIG Holding by the Group Sustainability Office (GSO) in close coordination and cooperation with the departments. Progress reports at the local level are embedded in the governance structure and are reported to the local supervisory board twice a year. Progress in implementation and significant changes are also discussed in the meetings of the Sustainability Committee and communicated to the full VIG Holding Managing Board. With regard to the measurement of progress with the emission reductions in the individual spheres of impact, reference is made to chapter ESRS E1-6 “Gross Scopes 1, 2, 3 and Total GHG emissions”.

Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model

In the course of the consolidated double materiality assessment of VIG, the central climate-related impacts, risks and opportunities were identified. The table below shows the identified climate-related risks and assigns them to physical or transition risks.

• The physical risks of climate change arise directly from the consequences of climate change, such as an increase in the global average temperature and the related more frequent and intense natural disasters and extreme weather events such as floods, heat/droughts, storms and hail. In accordance with the classification of climate-related hazards in the ESRS, a further distinction is made between acute and chronic risks in relation to physical risks. This classification also corresponds to the system used by the Network for Greening the Financial System (NGFS):

  • Acute risks include short-term extreme weather events such as storms, floods or heatwaves.

  • Chronic risks arise from long-term climatic changes such as increasing average temperatures or rising sea levels.

• Transition risks in connection with climate change refer to economic and financial losses that may arise in the course of the adjustment process towards a lower-carbon and more sustainable economy. Key factors contributing to the emergence of such risks include new political and regulatory frameworks, technological developments, changes in market sentiment among financial stakeholders, and shifts in societal or customer perceptions, which can also bring reputational risks.

A detailed description of the identified climate-related impacts, risks and opportunities can be found in the next chapter concerning the disclosure requirement related to E1 ESRS 2 IRO-1 “Description of the processes to identify and assess material climate-related impacts, risks and opportunities”.

By conducting a scenario analysis, VIG assesses how climate change will affect claims development and therefore the insurance business. Regular internal risk analyses are also carried out on the medium- and long-term impacts of climate change, covering both transition risks and physical risks. Internal and external experts working together assess the probabilities of probabilities of natural disasters and calculate the possible impacts in all key markets of VIG in order to ensure the long-term resilience of the Group-wide insurance portfolio. With regard to physical risks, scenarios with three different temperature increases (1.5°C, 2.0°C and 3.0°C) are analysed, which enables analysis over short-, medium- and long-term time horizons. The risk models applied are regularly improved on the basis of new data, facts and insights such as the latest scientific studies or newly constructed flood protection measures, for example.

The following table shows which natural hazards are relevant for VIG and which are influenced by climate change from a scientific standpoint.

In the consolidated financial statements, any impacts of the climate risks identified in the course of the scenario analysis (including floods) were also assessed in the valuation of assets and liabilities, where applicable. Further information can be found in the notes to the consolidated financial statements in the section “Risk strategy and risk management”. The expertise gained in the area of underwriting helps VIG purchase the optimal reinsurance coverage for assumed risks, among other things. In addition, the natural disaster reinsurance programme is reviewed annually, allowing the occurrence of any scenario impacts to be mitigated by appropriate reinsurance.