NGOs call on investors to respond to coronavirus pandemic through net-zero transition packages

The NGOs expressed concern that no insurer has a commitment to only support projects which are consistent with the needs of a 1.5C transition

A letter, signed by 25 NGOs in 11 countries including Unfriend Coal, 350.org, AVAAZ and Oil Change International, calls on insurers to get “serious” about commitments to climate change by stimulating “green and fair” recovery programmes to respond to the economic downturn caused by the coronavirus pandemic.

The letter has been sent to board members of global insurer coalitions including, the Global Federation of Insurance Associations, the Pan-European Insurance Forum, the International Insurance Society and the Net Zero Asset Owners Alliance. It calls on the organisations to divest from fossil fuels and commit to phasing out oil and gas companies in line with the 1.5C pathway.

“International insurance associations and many of their member bodies have made numerous public commitments about the need for rapid climate action. If you are serious about these commitments you now need to speak out, vigorously and publicly, at the international and national level for green and fair recovery programs which are consistent with the IPCC’s 1.5°C pathways,” the letter states.

“In addition, the insurance industry has to get its own house in order with regard to the climate crisis. Insurance associations should encourage their member companies to divest from fossil fuel companies, to end cover for coal projects, coal companies and for oil and gas expansion projects, and to commit to phasing out cover for oil and gas companies in line with a 1.5°C pathway.”

Since 2017, almost 20 insurance companies have scaled back or ended insurance for coal projects, with others extending those restrictions to tar sands and Arctic oil. However, the NGOs expressed concern that no insurer has a commitment to only support projects which are consistent with the needs of a 1.5C transition.

The letter claims that insurance executive identified the threat of a “new, highly infectious and fatal pandemic” in a survey as early as 2013, but failed to make meaningful investment decisions. In 2019, the same survey of insurers listed climate change as the world’s greatest threat.

Insurers are being called upon to place climate mitigation at the centre of efforts to boost the economy. Asia’s economy is down 20% for the first three months of the year, the FTSE 100 has suffered its worst quarterly performance since 1987 and the UN projects that foreign direct investment flows could fall between 5% and 15%.

In response, NGOs are calling for insurers to support government stimulus packages by not locking in fossil fuels through subsidies, instead investing in social safety nets for low-income workers. The packages should also work to boost renewables – now the cheapest form on energy for two-thirds of the global population – while maintaining carbon regulations on carbon-intensive industries. Crucially, the NGOs state that no support should be provided for companies that can’t transition to a net-zero world.

Net-Zero Asset Alliance

Insurers have been given until May 18 to issue a public statement in response. Some, including Allianz, Aviva, AXA, Munich Re and Zurich have expressed support for the call to action under the Net-Zero Asset Owner Alliance.

The Alliance was set up in September 2019 by investors collectively responsible for investments worth $2.4trn at the time, committing to ensure that their respective portfolios are carbon-neutral by 2050. There are now 18 members, with collective assets under management of more than $4.3trn.

In joining the alliance, insurers, re-insurers and fund managers are required to ensure that companies backed by their portfolios are operating in line with the Paris Agreement’s more ambitious 1.5C trajectory. As per the Intergovernmental Panel on Climate Change’s (IPCC) advice, reaching 1.5C will require global carbon emissions to reach net-zero by mid-century.

The Alliance has also outlined its areas of focus for 2020. Members will advance the measurement and public reporting of climate-related data, engage with portfolio companies on setting net-zero targets and engage policymakers on net-zero legislation and ambitions.

The Alliance’s chair and chief investment officer at Allianz, Günther Thallinger, added: “Tomorrow’s recovery plans can and must lay the foundations for an irreversible shift to a resilient, net-zero and inclusive economy. The Alliance stands ready to work with governments, international agencies and other stakeholders to realise this goal.”

Matt Mace