Why Insurers Need to Ditch FOSSIL FUELS
Coal, oil and gas produce more than 80 percent of all climate-destroying CO2 emissions. Fossil fuels are also one of the primary sources of air and water pollution, which kills an estimated 9 million people every year.
Our future well being depends on the rapid, global phase-out of coal, oil and gas. The Inter-Governmental Panel on Climate Change has called for a “rapid and far-reaching transition” to a low-carbon economy of unprecedented scale. We can’t afford to build any new fossil fuel projects and need to rapidly reduce coal, oil and gas consumption.
In sharp contrast to the required shift, hundreds of new fossil fuel projects are currently under construction or in the pipeline. If completed these projects would make it impossible to avoid an unmanageable climate breakdown.
Insurers – critical players in the transition away from fossil fuels
Insurance companies are in a unique position to accelerate the transition to a 100% renewable energy future. As risk managers they play a silent but essential role in deciding which types of project can be built and operated in a modern society. Without their insurance, almost no new coal mines, oil pipelines and power plants can be built, and most existing projects will have to be phased out.
With assets of approximately $30 trillion, insurers are also the second largest group of institutional investors after pension funds. Reports commissioned by Ceres and the Unfriend Coal campaign have found that the largest U.S. and European insurers have invested close to 600 billion dollars in fossil fuels.
Insurance companies cover a large part of the increasing damages caused by ever more serious hurricanes, wildfires, floods and droughts. They have access to the world’s best climate science and have warned about climate risks since the 1970s. Continuing to prop up the fossil fuel sector is incompatible with their fundamental mission to protect us from catastrophic risk.
Our best insurance is to keep coal in the ground.
Insurers need to put their money where their mouth is. They need to:
- Stop insuring coal, oil and gas projects and companies;
- Divest from the fossil fuel industry;
- Insure and invest in the low-carbon economy;
- Bring all their business activities, including as shareholders and corporate lobbyists, in line with the goals of the Paris Agreement.
Coal becoming uninsurable
By May 2020, 19 insurers had adopted policies restricting their coverage of the coal sector, and seven had restricted their cover of tar sands projects. At least 40 insurers, with combined assets of about $9 trillion, had divested from coal and other fossil fuels. The table below analyzes these policies against 5 important criteria. To find out about other insurers, read our most recent scorecard, which rates insurers on their climate and coal policies.
Many of the adopted policies contain loopholes or are not strong enough to support a phase-out of coal by 2030 in OECD and European countries, and 2040 elsewhere. Yet the momentum is growing, as 12 of the 19 policies were adopted in 2019, including by two Australian and four US insurers. To make fossil fuels uninsurable for good, we must close the existing coal loopholes, expand the exclusions to oil and gas, and push other insurers to join the trend!
