New report and webpage shed light on insurance company investments in fossil fuels as well as green investments – YubaNet
LOS ANGELES- Insurance Commissioner Ricardo Lara today released a new report and webpage detailing insurance company investments in fossil fuels as part of his overall effort to protect consumers from the impacts of climate change. The report is the most comprehensive study of fossil fuel investments by insurance companies ever conducted by a US state. For the first time, the report identifies insurance companies’ holdings of green bonds that support investments in clean energy and other environmental projects, helping consumers and the California Department of Insurance measure companies’ progress. insurance in the fight against climate change.
“We need more climate-focused investment to solve our climate crisis, including from insurance companies who need to do more to protect consumers and the environment,” said Insurance Commissioner Ricardo Lara. “For the first time, we are disclosing investments in fossil fuels while measuring the commitment of insurance companies to sustainable development through their investments in green bonds. This report is part of my ongoing overall strategy to address insurance companies’ exposures to fossil fuels and hold them accountable while letting consumers judge for themselves these companies’ progress on climate action.
Californians can visit the department’s website and type in the name of their insurance company to find out what percentage of their premiums are invested in fossil fuels. For example, the new report shows that insurance companies continue to invest heavily in fossil fuels, including the carbon-intensive oil sands, which are one of the most destructive forms of oil extraction for the environment. Although investments in green bonds doubled between 2018 and 2019, the share of investments in green bonds is small compared to the overall investment potential of the insurance sector. The data comes from financial investment information published in 2018 and 2019, which was analyzed by S&P Global.
Insurance companies use investments to help pay claims, so disclosure of potentially risky investments is necessary. Although climate change increases threats to the public from wildfires, floods and heat waves, it also poses a significant risk
California is the nation’s largest insurance market and the world’s fourth largest insurance market, and Commissioner Lara is working with other states to improve climate information nationally. He led a bipartisan effort by the National Association of Insurance Commissioners to adopt a new global insurance company climate risk reporting standard on April 8, in line with the Task Force on Climate-Related Financial Disclosures, or TCFD. Insurance regulators in France, Switzerland and the UK currently require TCFD-aligned reporting. US financial regulators such as the US Securities and Exchange Commission are also taking steps to require TCFD-aligned disclosures for other financial institutions.
While 28 insurance companies provided TCFD-compliant reports in 2021, this list will grow to nearly 400 insurance companies and groups – representing nearly 80% of the regulated U.S. insurance market – following this action.
The Department’s new website and report are part of a “sustainable insurance roadmap” that Commissioner Lara is finalizing with the United Nations, which includes increasing green investments, sustainable insurance and nature-based solutions at the heart of the strategy.
Commissioner Lara launched the report in 2020, building on the Department’s previous efforts and ongoing efforts at the federal level to increase climate disclosures for other financial institutions.
“Because insurance is regulated by states, we regulators need to work together to protect consumers by reviewing insurance companies’ exposure to climate risks and their progress toward sustainable investments,” said Mike Kreidler, Washington State Insurance Commissioner, which has worked with California and other states on increasing climate disclosures. “Efforts like this initiated by California Insurance Commissioner Lara can encourage insurers to help put us on a path to net zero carbon emissions. Identifying both fossil fuel investments and green bond investments, which decarbonize insurers’ portfolios, is a sensible approach.
“Increased transparency around institutional investors’ holdings and exposure to climate risks is a key first step to aligning the financial sector to net zero,” said Andrew Howell, Director of Investor Influence at Environmental Defense Fund. “We welcome this analysis from the California Department of Insurance as insurers explore how best to leverage their financial clout to accelerate the energy transition.”
“Investors around the world are asking how to protect the long-term value of the investment portfolio in light of the growing risks posed by climate change,” said Carly Greenberg, CFA, Senior Relationship Manager for the United Nations-backed Principles for Responsible Investment. “Regulators have an important role to play in encouraging the disclosure of data that helps investors and the public assess climate risks and take action. We commend the California Department of Insurance for its ongoing work to encourage insurers to report data that assists in the assessment of climate risks and opportunities.