News Alert – Will Marsh drop Adani?
March 4, 2020
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Will Marsh drop the Adani contract?
For more than a year Marsh, the world’s largest insurance broker, has tried to arrange insurance cover for the Adani Group’s giant Carmichael coal mine project in Australia. As reported by the Guardian Australia this morning, the company’s executive team will meet tomorrow (Thursday, March 5th) in New York to discuss whether to drop the contract – under strong pressure from staff, customers and campaigners.
In response to the Stop Adani campaign, more than 65 major companies, including 16 insurers, have ruled out getting involved in the Carmichael Project. The campaign has asked Marsh to do the same, and many Marsh employees have made it clear that they don’t want to be associated with the project.
Oliver Wyman, a consulting company owned by the Marsh & McLennan group, has just published a report stating that “the most powerful action that financial firms can take is to steer capital away from the most polluting companies, and toward the environmental leaders”. If Marsh decides to stick to the Adani project, they will expose themselves to critiques of utter hypocrisy.
Tomorrow, Marsh’s executive team has the opportunity to learn from Siemens, which is facing massive reputational damage after their CEO decided to go forward with a contract for the Carmichael project. If they don’t, campaign groups are planning to organize a global week of action targeting Marsh from March 16-20.
Ditching coal pays off, Moody’s tells insurers
“We view [insurance companies’] retreat from coal as credit positive, as it protects them against potential climate change liability risk, and reduces the risk of their investment assets becoming stranded.” This is the main finding of a new report on large insurance companies which Moody’s Investors Service published last week.
Ending their exposure to coal can benefit insurers in three ways, Moody’s suggests: They will less likely have to pay damages and legal fees for climate litigation targeting their clients. They can avoid troubled customers who may be tempted to cut corners on maintenance. And they can protect themselves from the risk that their investments become “stranded”.
The new report shows that by ending cover for coal, insurers can protect the climate, their brands and their bottom line at the same time. Laggards like AIG need to explain why they are prepared to destroy shareholder value while fuelling the climate crisis and putting their brands at risk.
The credit rating agency concludes: “Retreating from coal has a small negative impact on insurers’ revenue and short-term profitability, but we believe it will reduce risk to their profitability over the longer-term. By excluding coal and other fossil fuels, insurers can also enhance their credentials as partners to the growing clean energy sectors.”
US insurers invest in 6 degrees warming, BlackRock finds
The corporate bond portfolios of US insurers embody a scenario of 4-6 degrees of global warming by 2100. Their power sector portfolios even track to a scenario of more than 6 degrees of warming and are “severely underinvested in renewable power”. These are some of the main findings of a scenario analysis which BlackRock recently undertook in cooperation with the 2° Investing Initiative.
The scenario analysis found that US insurers have a “higher exposure to coal producers” than the Bloomberg Barclays Credit Index, which tracks the US corporate bond market overall. According to BlackRock, the first step towards a 2-degree aligned portfolio will be for insurers to “reduce exposure to coal mining and oil extraction”.
Karl Marx famously predicted that “the last capitalist we hang shall be the one who sold us the rope”. Likewise, US insurers are investing in a future that will put them out of business before long. BlackRock announced in January that it would “be increasingly disposed to vote against management and board directors” if companies don’t make their business practices more sustainable. It will be interesting to see how they take on the US insurance industry.
AIG confirms support for coal
AIG ranks among the world’s three biggest coal insurers and has invested more than $1 billion in coal miners and utilities. At the World Economic Forum in Davos, CEO Brian Duperreault confirmed that AIG will continue to offer insurance for the coal industry.
When questioned by Financial Times editor Gillian Tett, Duperreault argued that coal is “being taken out of the ground because people need it”. Rather than walking away from the coal sector, the CEO said AIG needs to work with clients who are “looking to transition their companies away from it, whether they’re the ones who produce or use it”.
Duperreault’s argument is spurious. If AIG wanted to support the transition away from coal, the insurer could adopt a policy which rules out support for new coal projects and defines a transition period during which it will still offer coverage to companies shifting away from coal. This is what peers like AXA and Zurich have done. In comparison, AIG’s support for coal appears to be indiscriminate. The US insurer even provided coverage to Adani Australia, the developer of the huge Carmichael coal mine in Australia, and has refused to rule out future support for the project.
As Moody’s, BlackRock and other mainstream investors turn against coal insurance, time is running out for AIG.
Dodgy deals: Vung Ang 2 coal power plant, Vietnam
Vung Ang 2 is a proposed $2.2 billion, 1200 megawatt coal-fired power station in Vietnam. The project is being developed by a subsidiary of the Mitsubishi Corporation, with an EPC contract for General Electric and Energy China GPEC.
According to Carbon Tracker, solar power will be cheaper than electricity from coal in Vietnam by 2022. Mitsubishi’s joint venture partner China Light and Power, a Hong Kong based utility, withdrew from Vung Ang 2 in December 2019, and several banks have ended their consideration as well. Climate campaign groups are calling on the Japanese government, Japanese banks and on insurers Tokio Marine, Sompo and MS&AD not to get involved with the project either.
FOSSIL FREE INSURANCE NEWS YOU MAY HAVE MISSED
- Maina Waruru, China’s state insurers have stopped covering pangolin medicines, China Dialogue, 2/25/2020
- Swiss Re takes further steps towards net-zero emissions, 2/20/2020
- QBE told to stop fuelling climate crisis, Insurance Business Australia, 2/18/2020
- 350 Colorado, Boulder becomes first U.S. county to screen insurance contracts based on fossil fuel policies, 2/13/2020
- C40 Knowledge Hub, Why sustainable insurance is a perfect companion to your city’s divestment efforts, February 2020
- ALVA Group, Unfriending coal: is the Insurance industry doing enough? 2/6/2020
- Charlotte Mathews, Hike in insurance premiums could deliver knock-out blow for under pressure coal miners, mining mx, February 4, 2020
- Robin Somerville, Willis Towers Watson, Renewable energy market review 2020, January 29, 2020