Best insurers on climate named as Zurich ups coal exclusions

Insurance giant Zurich has committed to further fossil fuel divestments in the same week it is named – along with Swiss Re and Axa – as the best insurance company for managing climate issues.

A group of NGOs known as Unfriend Coal has released a ‘scorecard’, ranking the global insurance sector on its performance on coal underwriting, coal divestment and climate leadership. The results were based on public information and responses from 25 companies approached earlier this year by Unfriend Coal, whose members include Greenpeace and Friends of the Earth.

Fifteen of those companies have between them diverted some $20bn away from the coal sector so far, the report claims, by divesting/excluding bonds and equities, and moving away from underwriting projects.

Swiss Re and Zurich landed the top spots in the league, scoring positively on all three categories. Axa scored well on coal underwriting activities and climate leadership, but moderately on coal divestment, putting it in third place. Others in the top 10 are: Scor, Aviva, Germany, Munich Re, Legal & General, Lloyd’s and Generali.

“Axa was the first global financial institution to shun investments in coal in 2015,” the authors say. “But [it] has since been overtaken by insurers that apply stricter criteria”.

One of those is Zurich, which this week further tightened its investment and insurance guidelines around coal, with a focus on companies deriving more than half their revenues from mining, and utilities that generate more than half their energy from coal.

On the investment side, it will divest from equity holdings in such companies, exclude new debt and “run off” existing holdings.

It will also engage them in a “risk-based dialogue” with a time limit of two years, in a bid to “drive a deeper discussion regarding their mid- to long-term transition plans,” Zurich explained in a blog. “Depending on the outcomes of these dialogues, the insurer will either facilitate a transition to an alternative insurer, or explore whether an underwriting exception should be granted based on the client’s strategy and position on climate risk.”

Zurich will also stop providing insurance or risk management services to new thermal coal mines and rule out new clients that generate more than half their revenue from mining thermal coal or utilities that generate more than half their energy from coal.It will apply stronger risk screenings to clients and investee companies deriving between 30% and 50% of their revenues from thermal coal mining or utilities with 30% to 50% of energy from coal. “The hope is that this additional level of dialogue will identify risk-relevant means of accelerating the transition, like new technologies or emerging best practices,” Zurich said.

Unfriend Coal claims that Swiss Re and Lloyd’s have also said they will announce new policies in coming months.

Many of the 17 insurers assessed by Unfriend Coal scored poorly or ‘n/a’ on all three categories. The majority of these were in the US (AIG, Axis Capital, W.R Berkeley, Berkshire Hathaway, Liberty Mutual, Prudential and TIAA Family), where Unfriend Coal said there has been no “meaningful action” from insurers. Others were Japan’s Tokio Marine, Australia’s QBE, Spain’s Mapfre, Germany’s Hannover Re and Switzerland’s Chubb. Many of these poor scorers did not disclose information when requested.

“Coal needs to become uninsurable. If insurers cease to cover the numerous natural, technical, commercial and political risks of coal projects, new coal mines and power plants cannot be built and existing operations will have to shut down,” said Peter Bosshard, Coordinator of Unfriend Coal. “Insurers also manage $31trn of assets, and by shifting investments from coal to clean energy, they can accelerate the transition to a low-carbon economy.”

This week, Australia’s Commonwealth Bank also committed to wind down coal investment on the back of pressure from the public and civil society. In a statement ahead of its AGM, Chairwoman Catherine Livingstone said: “Shareholders should note that our coal funding is comparatively small and has been trending down for some time. We expect that trend to continue…”

Australian campaign group Market Forces claims the announcement was a response to a recent shareholder resolution that would have required Commonwealth Bank to embed climate risk management into its constitution. It said the statement “codifies” what has already been evident in the bank’s lending practice over the past three years: it has not made new loans to coal since 2015.

However, Commonwealth Bank is a major lender to Adani’s Abbot Point coal port, which is due to be refinanced within a year. Market Forces says the port is fundamental to the success of developing the Carmichael coal mine – a major new project at the centre of big controversy. Commonwealth’s decision on the refinancing of Abbot Point will therefore be “a major test” of the bank’s statement this week, Market Forces says.