The investors taking on fossil fuel insurers

Third major US carrier faces shareholder vote on new fossil fuel underwriting

The investors taking on fossil fuel insurers


By Jen Frost

The Hartford and Chubb have faced down resolutions from Green Century Capital Management seeking to stop them underwriting new fossil fuel business.

Shareholders voted against the proposals at the carriers’ AGMs on Wednesday and Thursday.

Official vote counts will be revealed over the coming days.

Travelers will be third to face a vote on fossil fuels at its AGM next Wednesday, May 25, 2022. All three carriers’ boards recommended that shareholders vote against the resolutions, which are not legally binding.

Change backers include the $279 billion New York State Common Retirement Fund.

Speaking to Insurance Business, Andrea Ranger, Green Century shareholder advocate alleged that insurers are failing to join the dots between how the actions of emissions-producing clients impact other customers, and ultimately the bottom line.

The advocates are “not deterred” by failing to gain majority votes, Ranger said.

“Property and casualty rates are going to be, and are already, adversely impacted by climate change. To us, it’s a very straightforward proposition,” she said. “Anything that allows us to refile, we’re happy with.”

Green Century intends to repeat the demands next year, assuming no consensus is reached beforehand.

The Hartford firmly believes that “divestiture first strategies are not an effective path to net zero”, according to spokesperson Matt Sturdevant.

The carrier has been encouraged by the “overwhelming vote of confidence” from its shareholders, Sturdevant said.

The spokesperson said The Hartford regularly engages in open dialogue with its shareholders and has a “long-standing commitment to sustainability” demonstrated by actions across the business, including on climate-related disclosures, renewables investment and sustainable products.

“We remain determined to use our resources responsibly to address the challenge of climate change and are committed to keeping our stakeholders informed of our progress,” Sturdevant said.

Chubb declined to comment. Travelers has been approached for comment.

Investor tensions

While the fossil fuel resolution failed to pass, Chubb shareholders backed a non-binding resolution for it to report on plans to measure, disclose, and reduce greenhouse gas (GHG) emissions across underwriting and investments to meet United Nations Paris Agreement 1.5°C targets.

“The board and management will consider what additional reporting will be appropriate in response to the shareholder proposal,” Chubb said in a news update.

The result should be a “wake up call” for the sector, according to shareholder advocacy non-profit As You Sow president Danielle Fugere.

Travelers faces a ballot on this next week. The carrier has urged shareholders to vote against, claiming that “for reasons beyond its control” further emissions data associated with its underwriting and investment portfolios is either unavailable or unreliable.

Berkshire Hathaway shareholders shot down the GHG proposal at its AGM, where it gained just over a quarter (26.5%) of the vote.

Insurance is not alone in facing up to environmentally charged investor tension. Recent years have seen a spike in shareholder social and environment engagement across industries.

Overall ESG-related shareholder resolutions were up 20% year on year as of March 17, 2022, with 529 filed. That was according to As You Sow, which was behind the GHG demands. The organisation’s own non-insurance climate targets included Amazon, Caterpillar and Comcast, as well as energy firms.

Meanwhile a fresh approach by the SEC this year saw proposals put to the vote that would not historically have progressed.

Asset manager Blackrock – which supported just under half (47%) of environmental and social shareholder proposals in 2021 – cautioned of an onslaught of votes on “prescriptive or constraining” demands following the change.

Blackrock said this month that it was “not likely to support those [proposals] that, in our assessment, implicitly are intended to micromanage companies.”

Average shareholder support for climate-related proposals at Russell 3000 companies was 34% in 2021, according to a study by think tank The Conference Board.

Global pressures

While the SEC’s new tack may have exacerbated AGM disputes in the US, climate friction between investors and big business is not just a North American problem.

Australian QBE’s climate strategy and disclosure approach was this year slammed as “entirely inadequate” by Market Forces and Australian Ethical, which sought and failed to amend the carrier’s constitution – QBE argued the proposals were not in the “best interests” of all shareholders.

Global carriers have not just been faced with investor pressure this AGM season. UK insurance center Lloyd’s of London, which saw multiple protests this year, moved its annual meeting online due to disruption fears – a gambit that proved prudent when Coal Action Network climate campaigners were pictured outside its HQ on the day.

In Zurich Enge, home to Zurich Group’s shareholder meeting, Campax activists attempted to sail a 10m by 13m banner that said “stop insuring oil and gas projects” to its HQ.

Firms also face the risk of discord from within. This week the Bureau of Investigative Journalism reported that 100 staff members of broking giant Marsh had written to management to urge against arranging cover for the controversial East African Crude Oil Pipeline project.

Amid increasing international and policy focus, research developments, and evolving regulatory regimes, climate change is now a top priority for around 40% of carriers, a recent Efma and Capgemini report said.

Fossil fuel investor activist targets Chubb, The Hartford and Travelers are among 38 global insurance businesses that have pledged to end or restrict underwriting for coal projects, according to campaign group Insure Our Future. The latter are also two of 17 firms to have made commitments to restrict tar sands underwriting.

US insurance businesses have, however, been criticized for lagging behind their European and Australian counterparts on restricting cover for oil and gas projects.

All this mounting pressure comes as total economic losses from natural catastrophes hit $259 billion in 2021, up 20% from the year before. Meanwhile, natural catastrophes drove global insured losses of $105 billion that year, the fourth highest annual total since 1970, according to Swiss Re Institute estimates.

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