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Insurers advised to consider climate change when selecting asset managers

CalSTRS adds its voice to major Ceres report

Insurance companies should consider climate change expertise as a factor when selecting people to manage their assets, according to a new report from US sustainability advocacy group Ceres.

Insurers are advised to “ensure that investment advisors and asset managers have established expertise on climate change risk assessment and management”. Climate change, Ceres argues, has implications for equity, bond, infrastructure and commodities investors.

“Insurers investing in these asset classes are no less subject to climate-related losses than other institutional investors, and consequently it is imperative that insurers consider climate change expertise when selecting investment professionals,” Ceres goes on to say.

This is backed up by one of the leading pension funds in the US, the California State Teachers’ Retirement System (CalSTRS).
“By integrating climate change risk management into their practices, insurance companies greatly improve their abilities to offer sustained shareholder value,” said Jack Ehnes, the former Colorado insurance commissioner who is CEO at the $161.4bn fund.The report Insurer Climate Risk Disclosure Survey: 2012 Findings & Recommendations found that although the industry is increasingly acknowledging that extreme weather is “the new normal”, few insurers are really thinking about the impact of climate change on their business. The industry response has been “been highly uneven,” said Ceres president Mindy Lubber.

“It is imperative that insurers consider climate change expertise”

Just 23 companies had comprehensive climate change strategies – and of them, 13 are foreign owned. Industry leaders include names such as Munich Re, Allianz Group, Swiss Re, The Prudential Group and Hartford Insurance Group.
Many companies “won’t talk about climate change” and if they do, they use “hedged” language to avoid the controversial issue of whether it’s man-made, said report author Sharlene Leurig. She added the issue is less politically divisive in Europe, where insurers are often better prepared.