New York City Comptroller Scott M. Stringer has called on three multi-national insurance companies to end business ties with the coal industry, a move he says will protect clients from the effects of climate change and ensure long-term value for shareholders.
Stringer sent letters on April 24 to the executives of Omaha, Nebraska-based Berkshire Hathaway, New York, N.Y.-based AIG and Boston, Mass.-based Liberty Mutual Insurance. The letters were sent on behalf of the New York City Employees’ Retirement System, Teachers Retirement System of the City of New York and New York City Board of Education Retirement System. The three New York City systems, which held approximately $155 billion in assets as of February 2020 and are long-term AIG shareholders, divested from the coal industry in 2015 in response to financial and climate risks associated with coal production, according to Stringer’s letters.
In his letters, Stringer urged the three insurance companies to take immediate action to cut ties with the coal industry as well, including ceasing to underwrite any coal projects and divesting any holdings in companies that extract or distribute thermal coal. Together, Berkshire Hathaway, AIG and Liberty Mutual Insurance represent more than $6.7 billion in coal investments as of 2017, according to a press release issued by Stringer’s office.
“Divesting from the coal industry is the right thing to do for our planet, our future, and our children – and it’s the smart thing to do for investors and shareholders,” Stringer said in the release. “The science is clear: coal is polluting our air, water, and ecosystem. Continuing to invest in coal projects will only create greater financial risk, potential liability, and future cost-burdens in the short and long term.”
Stringer stated in his letters that coal accounts for approximately 40 percent of global carbon emissions, making it a risky business venture with at least seven major coal companies filing for bankruptcy in the past year.
To date, 19 insurance and reinsurance companies have begun limiting their underwriting of coal and 35 others have committed to some form of divestment, including Swiss Re, Zurich, Chubb and AXIS Capital, according to Stringer’s letters.
Many private firms have also begun to divest from the coal industry, with BlackRock recently announcing a commitment to divesting its $1.8 trillion in actively managed funds from any firm generating more than a quarter of revenues from thermal coal. Similarly, Goldman Sachs has ruled out direct finance for new or expanding thermal coal mines and coal-fired power plant projects worldwide, as well as direct finance for new Arctic oil exploration and production, according to Stringer’s letters.
Liberty Mutual, which Stringer’s letter stated carries $1.47 billion in coal investments as of 2017, has committed to phasing out future investments in coal, though it has not moved to divest its existing portfolio of coal investments just yet.
In its Environmental, Social and Governance (ESG) Review 2019 report, the company outlined its plans to make no new investments in debt or equity securities of companies that generate more than 25% of their revenues from thermal coal mining or utility companies that generate more than 25% of their electricity production from thermal coal. The company said it also plans to phase out coverage and investments for existing risks that exceed this threshold by 2023.
“We recognize the risk of climate change to our planet and are taking action to reduce carbon emissions,” a Liberty Mutual spokesperson told Insurance Journal. “Environmental sustainability has been a key focus for us for some time, and we have a long-term strategy of decarbonization and investment in renewable energy.”
The company has invested more than half a billion dollars in renewable energy over the past five years and aims to advance its energy investment strategy by primarily targeting private power investments in wind, solar, hydroelectric and gas-fired generation, according to the spokesperson. Its future investment commitments to fossil fuels have also declined by more than 50% over the past several years, the ESG Review report stated.
“We’re taking many steps that demonstrate our commitment to the shift toward clean energy, and we will continue to improve and build on the progress we’ve made,” the spokesperson added.
Stringer said in his letter to Liberty Mutual that while he recognizes the company’s efforts to evaluate its exposure to coal and to limit new coal investments, he believes the company should be doing more to divest existing coal holdings and ceasing to underwrite coal extraction projects.
“From the unprecedented wildfires that recently ravaged California and Australia to historic flooding across the American Midwest, we have all had to grapple with the repercussions of extreme weather events that many scientists have linked to our rapidly changing climate,” Stringer said in his letters. “Over the past three years, natural disasters cost the world economy an estimated $650 billion in costs. Clearly, climate change poses an enormous risk to the world economy and to the long-term viability of insurance companies.”
AIG, along with its subsidiaries, carries $5.16 billion in coal investments as of 2017, according to Stringer’s letter. Berkshire Hathaway subsidiaries carry $95 million in coal investments as of 2017, Stringer’s letter stated. AIG declined to comment. Berkshire Hathaway did not respond to a request for comment by press time.
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