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AXA sets the bar for fossil fuel divestment

December 13, 2017

While the Trump administration turns its back on climate science and the German government dithers, the French government is setting the pace on climate action. The same dynamic is now unfolding in the private sector: While US insurers are refusing to take climate action and German companies are taking their time, French insurer AXA has just adopted a policy on fossil fuels which sets a bold new standard for investors and insurance companies.

At yesterday’s One Planet Summit in Paris AXA, one of the world’s largest insurance companies, announced that it would divest another Euro 3.1 billion from coal, tar sands and pipeline companies to combat climate change. AXA will also stop insuring any new coal, tar sands and associated pipeline projects. While the new policy still has some gaps, Lucie Pinson from Friends of the Earth France called it a “huge step towards impact divesting” that should be followed by other investors and banks.

Even though insurance companies have warned about climate risks for more than 25 years, they continue to play a critical role in the fossil fuel economy. If they collectively stopped insuring coal power plants, tar sands and pipeline projects, none of these projects could go forward and existing plant would have to shut down.

Insurance companies also belong to the world’s largest investors in fossil fuels. A new report by the German NGO Urgewald just found that institutional investors hold at least $140 billion in the world’s 120 biggest developers of new coal infrastructure. The climate destroyers’ league table is led by asset managers BlackRock and Vanguard and Japan’s Government Pension Investment Fund. Yet 21 insurance companies – including the Life Insurance Corporation of India, Allianz, TIAA, Prudential, Aviva and MetLife – also continue to hold a total of $18 billion in active developers of coal projects.

Over the past two years, AXA already pioneered steps to divest from and stop insuring coal projects, even if at a less ambitious scale. Since then, many of its European competitors have followed suit, divested some of their funds from coal and in some cases stopped insuring coal projects. Now that AXA has raised the stakes, campaigners have called on the laggards in the insurance industry to take bold climate action as well.

Allianz divested its own funds from the coal sector in 2015, but not the $1 trillion in assets that it manages for third parties. As an asset manager the German insurer still holds more than $1 billion in active coal developers, and continues to insure such projects as well. “Allianz needs to follow suit or it will lose its credibility on climate change”, Urgewald’s Heffa Schuecking commented yesterday.

Aviva continues to holds close to $1 billion of third party assets in coal, tar sands and pipeline companies as well. Earlier this month, Indigenous Climate Action rejected a $150,000 award from Aviva Canada because of the “direct contradiction” between such investments and its mission and values. “AXA’s decision sends a loud signal to investors that projects violating the rights of indigenous communities and contributing to the climate crisis no longer belong on their ledgers” said Suzanne Dhaliwal of the UK Tar Sands Network. “We hope that Aviva will follow suit and promptly divest from their extensive tar sands investments.”

Generali, another leading insurer, has so far not taken any action on coal but plans to prepare a new policy by early 2018. “Compared with its European competitors, Italy’s self-declared lion looks rather like a scared rabbit in addressing climate change”, Antonio Tricarico, a campaigner with Re:Common, commented.

While many European insurers have made at least some progress on coal and climate change, US investors and underwriters such as AIG, Berkshire Hathaway and Liberty Mutual have not taken any meaningful climate action until now. Even as they refuse to insure coastal properties in response to climate change, US insurers continue to insure and invest in coal projects. As US customers grow more concerned about the impacts of climate change, such companies will lose their credibility fast.

A new scientific study just found that even divestment decisions by smaller investors have a measurable impact on fossil fuel companies by making it more difficult for them to access capital. The Global Coal Exit List, which was recently published by Urgewald, offers a practical blacklist for climate-conscious investors who want to clean up their portfolios.

“We send a strong signal to everyone that, while the topic is complex, it can nonetheless be tackled”, AXA CEO Thomas Buberl commented yesterday. “Unsustainable business will become un-investable and uninsurable business.” The ball is now in the court of AXA’s peers and competitors to make this happen.

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