Rock and a hard place

Multinationals and their insurers are finding themselves increasingly stuck between a rock and hard place when it comes to ESG and climate change, with climate activists on one side and certain Republican attorney generals and state governors (among others) on the other. And shareholders often split over green commitments.

While Europe pushes ahead with ESG legislation such as its Corporate Sustainability Due Diligence (CSDD) Directive and proposals on greenwashing, the US has seen the governor of Florida, Ron DeSantis, recently sign his anti-ESG rule into law.

Activists are targeting insurers and the cover they provide to oil and gas companies and others, while anti-ESG groups, notably in the US, accuse them of running a cartel, and pushing up insurance prices with their “woke” agenda.

The UN-convened Net-Zero Insurance Alliance (NZIA) was a pretty bold undertaking, a commitment “to speed up and scale up action to support the transition to a net-zero economy and tackle the climate emergency”.

NZIA members committed to “unilaterally and independently transitioning their respective insurance and reinsurance underwriting portfolios to net-zero greenhouse gas emissions by 2050. But after less than two years in existence, the NZIA is in turmoil, with a mass exodus of members, leaving just two of the founding members (at time of writing) – Aviva and Generali.

The withdrawals came just months after NZIA members announced they would begin setting targets (in July) aimed at reducing insurance-related greenhouse gas emissions.

Most of the withdrawing members emphasised their green commitments, but did not elaborate on the reasons for their departure. However, the reasons are not hard to find. As the NZIA itself noted, the withdrawals were those with “significant US business and exposure”, while Munich Re cited anti-trust concerns

It is believed to be fear of antitrust violations that has led to the exodus. Or perhaps in reality the fear of losing US business. Either way, it is being driven, successfully, by Republican attorneys general who wrote to NZIA members stating their concern over “the legality of your commitments”.

And as insurers started to leave the alliance, Utah Attorney General Sean D. Reyes released a statement: “We are encouraged to see another company leave an alliance that was focused on a radical environmental agenda over the interests of its clients. We will continue to be vigilant and take legal action where necessary to protect Americans from the dangers of ESG.”

The NZIA may be damaged as a major force, given the withdrawals of so many founding members, but hopefully, judging by the comments and commitments made by many of them, insurers will individually continue to take a sustainable approach in their underwriting and support the transition to a net-zero economy.

There may start to be a split between the Europe (and much of the rest of the world) and the US when it comes to ESG. But the idea that ESG is just a woke agenda is laughable, and certainly doesn’t reflect what is going on at corporate, national and EU level in Europe.

The risks and threats to sustainability as a result of ESG risks such as climate change and a lack of diversity, to name but two, are not going to go away because of such rhetoric. ESG may be under attack in the US, but certainly in Europe the rules and regulations are still coming thick and fast, while litigation is never far behind.

And the risks still have to be identified, measured and managed. The actions of a small minority will not halt the moves to try to create a more sustainable future, both for the corporates and for the world.