Dive Brief:
- Global insurers are underwriting and investing in projects that contribute to global warming, environmental damage and human rights concerns, according to a Thursday report from U.K.-based nonprofit ShareAction.
- The research examined the activities of 65 global insurers and showed weak performance across the board. Every individual theme insurers were evaluated on — including climate change, biodiversity, social and governance areas — received a median score under 30%.
- North American insurers scored behind their European and Asian counterparts, with no North American property and casualty insurer scoring any points for biodiversity underwriting. “What these rankings show is just how long a journey the insurance industry has to go on to meet net zero targets, protect nature and meet their obligations to safeguard human rights, ” Jonathan Middleton, senior researcher at ShareAction, said in a statement.
Dive Insight:
The report highlights ESG framework gaps among the companies surveyed. While the study found that a majority of insurers have some form of long-term net-zero target for investment, less than half have set long term net-zero targets for their underwriting practices. Meanwhile, just a quarter of those targets were aligned with the Paris Climate Accord’s goal of limiting global warming to 1.5 degrees Celsius, according to ShareAction.
Less than a quarter of insurers published a transition plan covering their investments and/or underwriting activities, according to the report.
“Long-term net-zero targets are only the first step. It is crucial that these targets are backed up by robust transition plans and interim targets setting out the route to get to net-zero, and these plans must then be acted upon,” the report said.
The study also found that half of insurers set interim emissions reduction targets for 2030 or sooner. However, researchers found that 58% of interim targets for investments covered all assets and just 11% of interim targets for underwriting cover all insurance business lines.
While most insurers incorporate some restrictions on fossil fuels in their underwriting and investments — 75% and 73%, respectively — selective restrictions and exceptions hamper their effectiveness. For example, the majority of insurers surveyed had few or no restrictions on conventional oil and gas in both their underwriting and investment activities, with around one-third placing any restrictions on oil and gas expansion in their underwriting (36%) and investments (30%), the report said.
Insurer blind spots included biodiversity, as well as human rights, labor and public health considerations. Nearly half of insurers (43%) – including all North American property and casualty insurers – received zero marks from ShareAction for biodiversity underwriting.
“Insurers’ collective biodiversity blind spot is especially concerning,” Claudia Gray, head of financial sector research at ShareAction, told ESG Dive in an email. “Nearly a third of those surveyed are doing nothing on biodiversity.”
Gray said a 2023 ShareAction survey of asset managers found nearly 75% of asset managers are using an external data tool to assess biodiversity risks. That contrasts with 35% of insurers who said they did the same for their investments and only 19% who use external tools to assess biodiversity risks in their underwriting.
Insurers’ poor performance is a sign voluntary initiatives aren’t moving the sector fast enough, Gray said.
“We need clear signals from policymakers and supervisory bodies that the financial sector, and insurers in particular, need to embed social and environmental risks and opportunities in their policies and business models,” she said.
Two companies attained more than half of available points in the survey, including France-based AXA Group in the property and casualty ranking, and CNP Assurances SA in the life and health ranking. U.K.-based Lloyd’s of London was among the worst performers overall.
Among its recommendations, ShareAction advises insurers to publicly disclose a comprehensive transition plan covering both underwriting and investment portfolios; implement strong risk assessment and comprehensive biodiversity policies; and develop and disclose a policy on free, prior and informed consent regarding Indigenous rights. On the latter, the researchers say the policy should clearly state “how considerations of Indigenous and local community rights influence investment and underwriting decisions.”
ShareAction’s report covers 65 of the world’s largest insurance entities and selected insurers based on total asset information available in the Thomson Reuters Refinitiv Eikon database. Results were based on a survey conducted by ShareAction in 2023, and insurers were sent prefilled answers based on publicly available information. Among companies surveyed, 54% of insurers verified the data. Insurers were given grades based on their performance and meeting a set of key standards.
