UK insurers lead the ranks for climate action

The latest ‘Got it Covered? Insurance in a Changing Climate’ report from independent non-profit Asset Owners Disclosure Project (AODP) rates the world’s 80 largest insurers on their governance around climate-related ambitions, targets, assessments and disclosure.

The report found that less than 0.5% of the collateral invested by ranked asset owners, who have collective funds worth $15trn, were in low carbon projects. Additionally, the report found that 90% of strategies set within the global sector fail to align with the Paris Agreement’s flagship goal of limiting the world’s temperature increase to 1.5C.

Nine of the top ten asset manager leaders are based in Europe, with UK insurers Aviva and Legal & General claiming second and fourth place respectively. France-based AXA took first place, with German insurer Allianz and Dutch firm Aegon completing the top five.  

Worryingly, several US insurers are setting strategies that map to trajectories of up to 6C, according to the report. The only other UK firm on the list – Prudential – ranked in the top 40.

“We applaud the leading and innovative approaches taken by the sector’s leaders but unfortunately, there is no time to celebrate,” AODP’s report author Pavel Kirjanas said. “While the world is being shaken by climate-induced catastrophes, the world’s largest insurers keep pressing the snooze button.”

Divest, disclose, decarbonise

The report found that more European investors are aligning themselves with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which revolve around calls for companies to adopt climate-disclosure and add a sense of flexibility to evolve reporting measures as the practice matures. It noted that European insurers’ ability to top the rankings were facilitated in part by a continent-wide active debate around climate disclosures and increasing pressure from civil society.

But even European insurers’ efforts have been slammed by some campaigners, such as Unfriend Coal, who deem them insufficient to keep global temperature rises below 2C. Such campaigners point out that even top-rated insurers in AODP’s leader category do not always exercise their power as shareholders and underwriters, but instead continue to support high-carbon businesses. 

However, the report comes at a time when more and more banking and insurance giants are announcing plans to divest from coal companies. Approximately £15bn has been divested by insurers in the past two years, according to a separate report from Unfriend Coal Network, which found that 15 companies had fully or partially cut financial ties by selling holdings in coal companies and refusing to insure their operations.

Commenting on the report, Aviva’s head of sustainability Zelda Bentham welcomed the firm’s rating as the best in the UK but added that there is “much more to do” globally.

“Increased action on addressing climate risk is needed throughout the insurance sector value chain, on both the asset and liability side, if we are to continue in our role as society’s risk manager,” Bentham said.

The report found that US insurers were among the worst stallers on climate challenges, with all but three US insurance firms surveyed having no plans in place to decarbonise their portfolios or address climate-related financial risks in the wake of President Trump’s decision to pull the US out of the Paris Agreement. 

Sarah George