Fresh warnings over lack of climate action across finance sector

The reinsurance and pension fund sectors are failing to progress the finance sector towards key climate goals by continuing to invest in coal projects over low-carbon alternatives, two reports have claimed.

The first briefing paper from NGO Unfriend Coal claims that just one of the world’s five largest reinsurance firms has made “significant” moves to divest from coal since 2016, as the sector continues to exploit “weak” industry policies and invest in carbon-heavy projects.

Unfriend Coal’s conclusion it built on analysis from the coal investment policies of the five companies that collectively controlled nearly half (44%) of the global reinsurance market as of 2016 – namely Swiss Re, Hannover Re, Munich RE, Scor and Berkshire Hathaway.

The paper, published today (11 September) and entitled Reinsuring Climate Chaos, argues that while the direct insurance industry has made strong moves to divest from coal projects in recent times, the response from the reinsurance industry has been far weaker.

It argues that Swiss Re is the only one of the “big five” to have taken “significant” action against coal funding in the past two years. In July 2018, the company pledged to stop offering cover to companies and projects which rely on coal for more than 30% of their revenues or more than 30% of the power they generate.

The paper claims that Swiss Re is the only reinsurer of the five to restrict cover for coal companies as well as coal projects. None of the groups currently restrict cover based on the absolute scale and development plans of companies’ coal activities, the report states.

“Reinsurers have warned about the risks of runaway climate change for decades,” Unfriend Coal’s European co-ordinator Lucie Pinson said. “It is unconscionable that, at a time when they could help push destructive coal plants over the edge and develop innovative insurance solutions for the low-carbon economy, these companies continue to prop up climate-destroying fossil fuel projects.”

The paper, published to coincide with the Rendez-Vous de Septembre reinsurance conference in Monte Carlo, calls on reinsurers to cease providing reinsurance support for all new and existing coal projects globally – as well as for companies developing new coal projects – before the COP24 conference in Poland in December.

It also recommends that such firms should introduce policies that prevent companies depending on coal for more than 30% of their business from gaining support, along with those producing more than 20 million tonnes of coal a year or operating more than 10GW of coal power. Additionally, the document calls on reinsurers to divest their assets from companies covered by these criteria.

“While the number of reinsurers active in the coal market can be counted on the fingers of two hands, it would only need the withdrawal of the biggest among them to challenge the expansion of the coal sector and hasten its phase-out,” the briefing states.

Climate peril for pensions? 

Further questions surrounding the finance sector’s climate efforts have been raised by ShareAction’s Asset Owners Disclosure Project (AODP). The organisation published research this week, revealing that 63% of pension funds worldwide have “little or no strategy on climate change”. 

In a report entitled Pensions in a Changing Climate, AODP assesses the world’s 100 largest public pension funds- with combined assets worth over $11trn – on how well they are performing against the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations.  

The report claims that less than 1% ($90bn) of the assets collectively owned by these funds is invested in low-carbon solutions, a figure which falls short of The Intergovernmental Panel on Climate Change’s global recommendation of $1.1trn. 

It additionally notes that only 10% of the pension funds featured were found to have a policy on excluding coal from their investment portfolios.

AODP analyst Felix Nagarwala said the findings of the report will place pressure on funds which are “all talk and no action” to bolster their climate efforts. 

“Pension funds have a duty to serve the long-term interest of their members, which isn’t being met if the money they invest is depleted along with the health of the planet,” Nagarwala said. “It’s high time the industry takes action.”

The report echoes recent research from the Environmental Audit Committee (EAC), which found that 25 of the UK’s largest pension funds had collectively considered just 12 climate risks at board level. Of the 25, five were unable to identify one climate action they had taken.

Sarah George

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