Insurers’ investment strategies not meeting climate goals

New report shows European insurers are outpacing the US

Insurers’ investment strategies not meeting climate goals

Insurance News

By Alicja Grzadkowska

In spite of the risks stemming from climate change, a new report finds that nine out of 10 American insurance companies’ investment strategies fail to align with goals set out by the Paris Agreement.

“Despite looking at and considering this question over a number of years, they have not come to a conclusion that it’s an important or material question,” said AODP project manager Pavel Kirjanas.

The Asset Owners Disclosure Project  (AODP), which is part of the responsible investment organisation ShareAction, evaluated 80 of the largest insurers around the world and found American companies lacking in active management of material climate risk. AODP analysed insurers’ climate disclosures using recommendations from the Task Force on Climate-related Financial Disclosures, and applied 40 indicators that resulted in rankings from AAA to the lowest ranking of X.

The US insurer which scored highest was The Hartford, with a rating of CC, while Metlife and Travelers both got ratings of C. The rest of the US insurance companies on the list, including Prudential Financial, AIG and New York Life, received ratings of D or lower. European insurers, like AXA, Aviva and Allianz, are meanwhile leading the charge on climate risk.

“The public debate in Europe has been so extensive and it’s been quite forceful, not just by governments and by leading politicians, but also by key industry spokespeople, such as Mark Carney, who’s the governor of the Bank of England,” said Kirjanas. “That coupled with a very strong voice coming from non-governmental organisations, and civil society in general, putting pressure on insurers and financial institutions makes for advancement in this whole climate risk debate.”

According to the AODP, none of the US insurers in the rankings measure the emissions intensity of their investment portfolios, 70% don’t identify low-carbon investments in their portfolios, and only 21% demonstrated evidence of a climate-aware approach to investing.

Titans in the insurance sector still have work to do to become leaders on climate change. Kirjanas recommends executives look at how resilient their investment portfolios are to climate change and how exposed they are to risks, and then address those exposures in their investment strategies.

“It all starts with the realisation that [climate change] is a material risk and it’s simply not prudent to ignore it anymore. You can believe or not in climate change, but the transition to a low carbon economy is taking place, and we see more and more investment from the government and institutions into low carbon solutions,” said Kirjanas.



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