Insurance giants driving climate change, biodiversity loss and human rights violations - report

Written by Adam Cadle

26/05/2021

Insurance companies are lagging behind the finance sector’s push to embrace ESG investment, with few of the world’s largest insurers considering climate change, biodiversity loss and human rights violations in their underwriting decisions.

ShareAction ranked 70 of the largest global insurers, and the lowest ranking – an E – was given to almost half (47%) for their sustainability practices. US companies performed poorest of all, with five US insurers - Nationwide, AIG, Allstate, Genworth Financial and Protective Life Insurance Company - appearing in the bottom 10 of the ranking. The five companies scored less than 4% each across the four categories of governance, climate change, biodiversity and human rights.

Coal finance emerged as one of the few ESG issues insurers are starting to address: a third of companies were found to have policies restricting underwriting for the coal industry. But just 16% of assessed insurers have similar policies restricting underwriting of tar sands, shale oil or Arctic oil exploration. And not a single insurer was found to have any restrictions for underwriting conventional oil and gas operations.

ShareAction found that 11 insurers have net zero targets for their investment activity. But only two have set net-zero targets for their underwriting activities and neither has published a plan outlining how they will achieve this. According to ShareAction, this reflects a general trend, whereby insurers’ ESG performance on underwriting is consistently poorer than on investment activity.

ShareAction said: “This finding is surprising. One might expect that the types of systemic risks explored in this survey would be an essential part of the analysis that feeds into development and pricing of underwriting products. This does not appear to be the case – instead, insurers’ approach to investment is more advanced. One reason for this might be that insurers have been able to learn from other asset owners and asset managers how to incorporate ESG issues into investment decisions and have benefitted from the general mainstreaming of sustainable finance, while the underwriting side requires a much more insurance-centric approach.”

On human rights, just 13% of insurers have a policy to exclude investment in companies that are knowingly in breach of human and labour rights. On biodiversity, not one of the assessed insurers has set any nature-related targets, such as those relating to deforestation, hazardous waste or water use across their portfolio.

No US insurer has a human rights policy and just one – Liberty Mutual – has imposed any restriction on coal finance.

Three European insurers – Axa, Allianz and Aviva – lead the ranking of insurers with a property and casualty business, each receiving an A rating. All three have climate policies that cover their underwriting activity, as well as restrictions on financing coal companies and those in breach of human rights.

A spokesperson for AXA said: “AXA’s position at the top of ShareAction’s global insurance ranking evidences the strong governance of sustainability-related topics across our investment and underwriting business, which is foundational to the robust management of social and environmental risks and impacts. While we are proud to be recognised for our firm commitment to cross-industry collaboration, effective active ownership, and leadership on biodiversity-related issues, ShareAction’s ranking shows that there is still a long way to go for the sector at large. We welcome the publication of this ambitious global assessment and hope that it propels the industry into action to meet the era-defining challenges of climate change and biodiversity loss.”

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