Opinion: GOP’s opposition to ESG may be muting insurers, but failing to alter their pro-environmental business choices.

Over recent months, there has been an organized backlash against investors and insurers who incorporate climate change risks into their business models. This pushback — stemming from Republican-led states — is having an impact on the way companies speak publicly. But whether it will affect their efforts to respond to climate change is not clear.

The latter targets were global insurers, and their responses offer some insight.

Under pressure, many major insurance companies, incl AXA, AllianzAnd Lloyd’s And Swiss ReIt withdrew from a UN-organized coalition committed to a global goal of net zero emissions by mid-century. There is a word for companies staying calm in the face of orchestrated attacks: “bleach. ”

But while the insurers’ exit from the coalition may seem like a victory for politicians and political donors who want to delay action on climate change, the companies say leaving does not change their business decisions.

I have worked with international companies in the field of sustainable development for More than 20 years Follow what they say and what they do. The insurance industry has clear reasons to care about climate change and efforts to slow it, starting with the fact that disasters cost them money and risks are increasing.

assault on climate protection

Republicans started Targeted at ESG investors– Those who incorporate environmental, social and governance performance criteria into investment decision making – a few years ago ESG asset management has grown In the tens of trillions of dollars. Texas led the way in 2021 by law Preventing state entities from investing with companies that cut their investments in fossil fuel industries.

In 2022, Republican prosecutors are on the hunt Glasgow Financial Alliance for Net ZeroGFANZ, or GFANZ, is an umbrella body for insurance companies, banks, asset owners and asset managers. The influential group had membership starting with over 400 financial institutions representing more than $130 trillion in assets under management.

One offensive line accuses GFANZ members of Breaking antitrust rulesclaiming that when companies participate in groups committed to reducing greenhouse gas emissions, competitors cooperate in ways that affect prices in violation of US law.

“Net Zero” is an acronym for taking steps to limit global warming to 1.5°C, an international goal to prevent the growing extreme weather damage that fuels severe storms, Heat and forest fires. Clubs formed across the financial value chain to find solutions. Including the United Nations convened Net-Zero Insurance Alliance (NZIA)A group of some of the world’s leading insurance and reinsurance companies. Members commit to moving their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050.

In a letter dated May 15, 2023, 23 Republican attorneys general They took their criticisms further and tried to blame the insurance alliance—rather than the rising cost of disasters like wildfires and hurricanes—for the economic ills caused by rising insurance premiums, fuel prices, and inflation.

Faced with the threat of lawsuits, whether applicable or not, and the possibility of reputational damage, the group mainly left several European-based insurance and reinsurance companies that had large investments in the United States.

The attacks dampened public discussion about evolving practices in net zero trails and investing in ESG, even for those who stayed. Few companies are keen to call attention to their progress because, in the global marketplace, a backlash from the United States threatens none of them.

GFANZ stated that “Now political attacks Interfering with the independent efforts of insurance companies To price climate risk, which will hurt policyholders, principal investors and local economies.

Climate voices are silenced, but not actions

However, while insurers may not be speaking out, their assessment of climate trends has not changed, nor has the impact of these trends on their businesses.

When Lloyd’s withdrew from the alliance in late May 2023, the London-based insurer and reinsurer made clear it remained “committed to delivering on our sustainability strategy including supporting the transformation of the global economy”. said so continue United Nations support Principles of sustainable insurance And Sustainable Development Goals.

Swiss Re also stressed that it has kept its sustainability strategy intact and that its withdrawal does not reflect a lesser commitment to climate policies. remain a member of Net zero asset owner alliance.

Swiss Re Group data clearly shows why. In 2021, some $270 billion in losses They were attributed to natural disasters around the world. The $111 billion of those insured losses represents the fourth-highest payout since the Swiss Re Institute, the research arm of the insurance company, began keeping records in 1970.

The World Meteorological Organization reports that weather and climate disasters such as floods, heat waves, and forest fires are common fivefold in the past fifty years. These disasters caused environmental damage, loss More than 2 million people and more than $3.64 trillion in economic damage.

Not talking about these risks does nothing to help homeowners and businesses that rely on insurance, and does nothing to stop climate change Exacerbate threats. Some advisors and auditors have begun to sound the alarm about the increasing potential for natural disasters The collapse of the insurance market model We know him today.

problem in the economy

The insurance industry plays an important role in the overall functioning of economies. It enhances resilience by providing a safety net against unexpected events, helping people and businesses recover more quickly. facilitates trade and commerce; For example, marine insurance covers the risks of freight shipments, ensuring that trade flows smoothly. It also encourages risk management practices.

Without insurance, the costs of disasters will fall heavily on individuals and businesses, hindering economic growth and stability.

Already, as climate risks increase, some areas are becoming increasingly uninsurable. State Farm and Allstate both cited wildfire risks when they recently announced they would stop selling new home insurance policies in California, putting pressure on outdated regulations for the insurance industry.

I look forward

As the United States approaches its long election season, the ESG backlash risks pushing more corporate transitions into the quiet zone and slowing down much-needed regulation.

The world is at an inflection point in climate transition efforts. capital is Switching to low-emission technologies In some cases, reshaping industries faster than he imagined.

Insurance companies have the ability to accelerate transition through their underwriting practices and enhance risk mitigation through their large investment portfolios. They also realize that in order to protect their balance sheets and for the benefit of the planet, society needs to accelerate the transition to net zero.

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