By Ed Ballard

Insurers should work with clients to help them shift toward greener business models instead of shying away from polluting sectors, executives said Monday at an event coinciding with the COP26 United Nations climate summit in Glasgow.

The insurance industry shouldn't become "an exclusion machine" that refuses to work with carbon-intensive companies, because that doesn't help the environment, said Renaud Guidée, group chief risk officer of France-based AXA SA. "You have a better conscience but the planet is none the greener," Mr. Guidée said at a virtual panel discussion hosted by reinsurer Swiss Re AG.

The event was held to discuss the Net-Zero Insurance Alliance, a group of mainly European insurers and reinsurers that was formed this year to coordinate action on climate change. Mr. Guidée is chairman of the group, which is affiliated with the U.N. and the Glasgow Financial Alliance for Net Zero launched by Mark Carney, the former head of central banks in Canada and the U.K.

The aim of the Net-Zero Insurance Alliance is to work with industries and companies so they can finance emissions-reduction plans, said another founder member of the group, Line Hestvik, chief sustainability officer of Germany-based Allianz SE.

"We're going to insure that transformation," she said.

To join the alliance, insurers are required to set targets for reducing the emissions associated with their underwriting portfolios that align with the global emissions cuts that scientists say would be required to limit the damage of global warming. Insurers should also consider companies' own targets when weighing up whether to work with them, Ms. Hestvik said.

"We will be a very happy insurance provider to companies that are on a good path to reducing CO2," she said.

But insurers will face challenges as their clients figure out how to put carbon-cutting plans into action and report on their process. Mr. Guidée said progress will depend on the financial industry having reliable metrics that shed light on companies' performance relative to their climate goals.

"There's only so much that insurers and reinsurers...will be able to do going forward unless we're supported by a robust disclosure framework," he said, adding that regulators have a crucial role to play. "This will be part of the agenda for COP26 -- to make sure we speak with one common language globally in terms of disclosure."

Executives said the insurance industry needs to educate employees so that climate considerations become a mainstream part of their work. "There will be a lot of training required of our underwriters," said Thierry Léger, group chief underwriting officer at Swiss Re.

Besides setting their own climate targets and helping clients decarbonize, insurers should be looking for "future risk pools" -- areas where the development of insurance markets could aid efforts to combat climate change, said Butch Bacani, the head of the U.N.'s Principles for Sustainable Insurance Initiative.

For instance, he said insurers could play a bigger role in facilitating projects that some countries are pursuing to mitigate climate change, such as planting mangrove trees that sequester carbon dioxide and protect coastal communities.

Write to Ed Ballard at ed.ballard@wsj.com