As the climate emergency intensifies, insurers are under growing pressure to withdraw insurance and investment from fossil fuels production and generation which are not consistent with 1.5°C. The industry is not only being urged to take immediate action on coal, but on oil and gas, too, according to a new scorecard measuring the response of the insurance industry on fossil fuels amid climate change campaigns.
Calls to action now sound from all quarters, from powerful United States senators – who in March wrote directly to major U.S. insurance companies for the first time about the conflict between their support for fossil fuels and their sustainability pledges – to UN secretary-general, António Guterres, who in June addressed the Insurance Development Forum (IDF), saying, “We need net zero commitments to cover your underwriting portfolios, and this should include coal – and all fossil fuels.”
Mainstream opinion within the insurance industry has also shifted. In July, Ekhosuehi Iyahen, the secretary-general of IDF, echoed Guterres’ plea, urging U.S. insurers to show more ambition.
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In the same month, the Geneva Association, an insurance CEOs think-tank, when delivering its annual women in insurance award for commitment to driving the reduction of coal underwriting, for the first time, publicly welcomed insurers’ withdrawal from coal, recognising it as “the most polluting and carbon-intensive fuel”.
Meanwhile, markets are now rewarding insurers that act on fossil fuels. In December 2020, French bank, Société Générale, found that insurers with strong coal and environmental, social governance (ESG) policies are adding billions to their value, potentially increasing market capitalization by up to +9 percent, and positioning insurers to seize opportunities in the low-carbon economy of the future.
ESG evaluates a company’s collective thoroughness for social and environmental factors, aimed at showing how the company’s business model – its products and services – contribute to sustainable development.
Conversely, insurers that duck society’s expectations on fossil fuels face repercussions. For instance, Legal & General Investment Management (LGIM) penalizes companies that breach its red lines. For insurers, this is “No restrictions around coal underwriting/investing.”
In June this year, LGIM showed that it meant business by divesting funds from U.S. insurer AIG, citing the company’s lack of thermal coal underwriting policy.
Also, providers of global sustainability disclosure, rating, and benchmark systems created their own ‘red lines’ this year by tightening the criteria for assessing insurance companies on coal, oil and gas.
CDP, a global non-profit organisation, and the World Benchmarking Alliance made underwriting and investment policies, excluding fossil fuels, key metrics in assessing insurers’ climate commitments.
Willis Towers Watson, global broker, in June, decided to title its annual power market review, ‘Adapting to New Realities’, concluding that the International Energy Agency’s (IEA) zero new coal, oil or gas roadmap “reflects a significant proportion of the global media and public opinion.”
The organisations engaged in the ‘Insure Our Future’ campaign, and co-publishers of the 2021 Scorecard on Insurance, Fossil Fuels and Climate Change, include: #aufstehn (Austria), Campax (Switzerland), Client Earth, Coal Action Network (UK), Connecticut Citizen Action Group (USA), Europe Beyond Coal, Fundacja “Rozwój TAK – Odkrywki NIE” (Poland), Future Coalition (USA), Indigenous Environmental Network, Instituto Internacional de Derecho y Medio Ambiente (IIDMA, Spain), Japan Center for a Sustainable Environment and Society (JACSES, Japan), Market Forces (Australia), Mazaska Talks (USA), Mother’s Rise Up, Public Citizen (USA), Rainforest Action Network (USA), Reclaim Finance (France), Re:Common (Italy), Reset (Czech Republic), Sierra Club (USA), Solutions For Our Climate (Korea), Stand. earth (USA/Canada), SumOfUs, The Sunrise Project, Urgewald (Germany), and Waterkeeper Alliance.