Could the climate risk alarm bells ring any louder for the insurance industry to take firm action on fossil fuels?
The new report from the Intergovernmental Panel on Climate Change predicts that temperatures will reach 1.5°C above 1850-1900 levels by 2040 under all emissions scenarios.
Most countries signed up to the goals of the Paris climate agreement in 2015 to keep the rise in global temperatures well below 2°C this century (and to pursue efforts to keep it under 1.5°C).
At the current rate of warming, the report says extreme events will occur at a rate “unprecedented in the historical record”.
A rise in sea levels of around 2m by the end of this century cannot be ruled out – and neither can a 5m rise by 2150.
The findings put the insurance industry and the Lloyd’s market in particular on the edge of a climate risk credibility gap.
Late last month the market contrived to launch a “road map for climate action” at precisely the same time as insurance focused climate activists were spraying its Lime St headquarters with a greenwash paint.
The group, Insurance Rebellion, may have a point.
The Lloyd’s report, Insuring a Sustainable Greener Future, makes jam tomorrow-type promises.
It successfully “sets out the sustainability and decarbonisation ambitions of the sectors that are critical to a successful global transition to a low carbon economy”.
It also highlights the genuinely laudable ways in which the global insurance industry will support and accelerate this transition.
But importantly the report does not make any commitment to discontinuing underwriting fossil fuel infrastructure, old or new, especially coal and shale gas, a major source of methane.
In a statement responding to the report, Insurance Rebellion said: “To anyone with an inkling of the scale of the climate emergency, it is as clear as day that the roadmap is not enough… Expanding insurance for electric cars and hydrogen is good, but if it’s not paired with stopping the insurance of all fossil fuels immediately, it simply will not put a dent in the climate crisis.”
Lloyd’s is not the only insurance institution to put their transition ambitions well before action. Most insurers have chosen to put coal and fossil fuel industry risks on a long-time horizon for pulling out.
It’s not kidding anyone, neither angry activists at one end of the spectrum, nor increasingly ESG-minded supervisors (like the Bank of England) at the other. Consumers and investors are sitting uneasily in the middle – for now at least.
It would be naïve to think that all fossil fuels can be turned off with a flick of a switch. But would the world economy really crash if coal mines, coal-fired power stations and shale gas were put out of business in short order?
At a time when windstorms, floods and wildfire are a fixture in the headlines, and everyone is banging on about net zero, the insurance industry could boost its credibility massively by acting decisively and exiting coal.
In the CO2 stakes as they stand, it’s low hanging fruit – and cutting it would send out a strong signal to the wider CO2 club. It could also turbo-charge the large-scale sustainable energy insurance business.