Top pension funds and insurers failing to engage with climate risks

Some of the UK's biggest pension funds are failing to address climate-related impacts, while 25 of the world's largest insurance brokers continue to invest in coal or tar sands projects, two damning reports have claimed this week.


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The first of the reports, from the Environmental Audit Committee (EAC), surveyed 25 UK pension funds with combined assets under management worth £555bn and found that only 12 had considered climate risks at board level, with five funds being unable to identify one climate action they had taken.

However, the survey did find that the majority of funds were moving to reduce their exposure to high-risk assets, with 80% having a climate strategy and seven having committed to report in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The EAC findings paint a mixed picture, with committee chair Mary Creagh MP claiming that the “encouraging” actions by the majority of respondents stood in contrast to the “worryingly complacent” responses from the minority.

“Pension funds should at least assess the exposure of their assets to the physical, transition and liability risks from climate change that will materialise during savers’ lifetimes,” Creagh said.

The Committee split the responses, ranking each pension provider as ‘engaged’, ‘more engaged’ or ‘less engaged’ with climate risks. BT Pension Scheme, RBS Group Pension Fund and Barclays Bank UK Retirement Fund were among the 12 to meet the top criteria, while Lloyds Bank and BP ranked among the six in the ‘less engaged’ category.

Heads in the sand?

The EAC findings come in the same week as the publication of a new Unfriend Coal report, which accuses 25 of the world’s largest insurers of continuing to invest in ‘dirty’ tar sands and coal energy projects.

The briefing paper, which was jointly published by Greenpeace US and Rainforest Action Network on Thursday (May 31), claims that insurers including AIG, Zurich, Munich Re and Lloyds of London are continuing to insure tar sands projects such as the proposed Trans Mountain Pipeline Expansion project in Western Canada, which it claims would unlock 130 million tonnes of CO2 each year.

The document alleges that of the 25 firms listed, only AXA has stopped insuring tar sands and the associated pipeline projects, pulling more than £525m of investment. However, it notes that 17 insurers have divested more than an estimated $23bn from coal companies so far.

“Climate science and the growing human and economic toll of climate disasters both demonstrate that we cannot afford to build any new coal and tar sands projects,” Unfriend Coal’s European coordinator Lucie Pinson said. “Insurance CEOs need to scale up their ambitions to meet the goals of the Paris Agreement and immediately ditch these extreme fossil fuels.”

A Munich Re spokesman told edie that the firm’s divestment policy extends only to refusing to hold any shares of companies that generate at least 50% of their revenues from coal, adding that the insurer “will continue to insure all types of companies” – a category which “might also include companies from the coal sector”.

“Such insurance is socially desirable, as insurance coverage is always linked to comprehensive risk management requirements that significantly reduce the risk of accidents,” the spokesman added.

AIG and Zurich both declined to comment on the briefing paper, with a Zurich spokesman adding that the firm “has a process in place to screen for environmental, social and governance risks in business transactions including coal and gas”. Lloyds of London has been approached for a comment on the allegations but at the time of publication is yet to respond.

Sarah George

© Faversham House Ltd 2022 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.

Comments (1)

  1. Frank Inglis says:

    Insuring "stranded Assets" doesn’t make any sense? Fossil fuel energy is sun-setting and the in-fighting and market manipulation won’t make any difference to the ultimate outcome. The Net Energy for the economy is now between 8 and 13 to one. Productivity growth has been in decline all over the world since 1993 and global debt cannot ever be re-paid, it’s mathematically impossible. Economics has changed and we better get use to it.

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