Swiss Re board member Karen Gavan says insurers and banks risk undermining the net-zero transition if they cut off capital and cover too aggressively from oil and gas companies.
Speaking at Swiss Re’s 40th Canadian Outlook Breakfast in Toronto, Gavan said climate and sustainability efforts are facing pressure in the current macroeconomic environment, but argued that insurers still have to keep transition goals front and centre – and do so pragmatically.
“In Switzerland, we have a requirement. We have to get to net zero by 2050, and we are doing everything we can in our own operations,” she said. “We’re well on track and meeting all our targets, but we have to be cognizant that the companies, whether we’re investing in them on our assets or underwriting them on our liability side, that they’re committed to that transition.”
She added that insurers “have to continue to transition with the whole world,” rather than getting ahead of what economies can realistically sustain.
Gavan said the current macro environment is “putting a damper” on climate action and warned against treating all hydrocarbons as equally undesirable, particularly in a country like Canada.
“We have to be a bit pragmatic, because there are so many trade-offs,” she told the audience.
Commenting on criticism of liquefied natural gas (LNG), she noted that, in practice, Canadian households still rely on it.
“We heard questions… really negative on LNG, but is it better than oil and gas or other options? We live in Canada, we cannot heat our houses without energy, and most of that comes through LNG. So we have to be smart about it.”
She made a similar point on critical minerals and battery supply chains, drawing on her experience growing up in northern Ontario.
“I know where the minerals are. You have to go across bog and wetlands, Indigenous lands to access the minerals to make batteries,” she said. “Isn’t that a trade-off?”
For Gavan, those examples underline the need to “invest in companies and underwrite companies that are working hard to transition, to improve their operations for the future” rather than applying blanket exclusions.
Gavan was explicit that oil and gas producers still have a central role to play in funding and delivering decarbonisation technologies.
“You can’t also starve oil and gas,” she said, referring both to bank lending and to insurance capacity. “The big oil and gas companies and LNG, they’re the ones investing in carbon capture and things that will actually help us transition, and so if we starve them of insurance and capital, they won’t survive.”
That position reflects a broader debate among insurers and investors about whether engagement and conditional support may be more effective than rapid divestment in markets that still rely heavily on fossil fuels.
For insurers, it also reflects a balance sheet reality: long-dated liabilities and transition pathways need to be managed over decades, not election cycles.
Gavan’s comments suggest several practical implications for Canadian carriers and institutional investors:
Focus on credible transition plans, not simple sector labels. Rather than avoiding hydrocarbons outright, she implied that the priority is whether counterparties are “committed to that transition” and investing to improve their operations.
Recognise regional constraints. In cold-weather markets like Canada, immediate large-scale withdrawal from gas-based heating is not realistic. Products and portfolios need to reflect that constraint while still pushing for improvement.
Factor in upstream and downstream trade-offs. Projects tied to batteries and renewables can create their own environmental impacts, from wetlands disruption to impacts on Indigenous lands, and those trade-offs need to be part of underwriting and investment analysis.
Gavan framed this not as a retreat from climate ambition, but as a call for more grounded execution.
“As insurers, we have to adapt with the economy,” she said. “Let’s invest in companies and underwrite companies that are working hard to transition to improve their operations for the future.”
