Big insurers develop plan to phase out coal

This article is part of our last Special DealBook Report on the trends that will shape the decades to come. Insurers have a unique an...


This article is part of our last Special DealBook Report on the trends that will shape the decades to come.


Insurers have a unique and powerful role in tackling climate change – and a role that can help determine the coal industryexistence even in the next two decades, if not earlier. Insurers are not only among the largest institutional investors, their ability to withdraw insurance coverage can hamper a company’s operations.

Insurance companies also pay when climate change causes natural disasters, costing industry $ 82 billion last year, according to insurer Munich Re.

AXA, the French insurance company, has eagerly looked at its levers for reducing carbon emissions. In 2015, AXA became the first insurer to divest from coal and now chairs the Net-Zero Insurance Alliance, a commitment signed by eight of the world’s largest insurers and reinsurers who have pledged to have underwriting portfolios with a net- zero greenhouse gas emissions by 2050.

The majority of the signatories are European insurers. US insurers, including AIG and Berkshire Hathaway, did not agree to the terms. AXA CEO Thomas Buberl is on a mission to change that.

You may have been the first to embrace the role of insurers in climate change. What motivated your decision?

We saw this whole issue around the climate transition very early on because as an insurer you basically have two perspectives: you have the perspective of investing and you have the perspective of underwriting. And from a subscription point of view, you also see the complaints later. And what we saw very early on was: yes, investing in coal, and so on, seems like a pretty isolated and attractive investment – but then when you mix up the disaster side, what happens. it to natural disasters and to the companies that we insure against floods, fires, etc.? What happens to the patients we have with their health? The equation doesn’t work.

Why do you think underwriting is the key to driving out the coal industry?

Even though all the insurers say: “We are no longer investing in coal”, even though all the banks say “We are no longer investing in coal”, there are still individuals who say: “I will give you the money. for coal. Whereas on the insurance side, if you don’t have insurance, you won’t have any funding – be it private, public, from an insurer, from an asset manager, whatever.

And so we said, “Look, bringing together the majority of this market, because [there’s] let’s just say 12, 15 actors in the world who do this job – if we get together and if we agree on the principles of what to do, we still insure and what we no longer provide – without breaking antitrust rules – we will create a very powerful coalition system to really drive that market out.

The government could intervene in several ways in this matter. A regulator could incorporate capital charges for unsustainable investments. Or it could take a taxonomic approach for green activities as is the case in the European Union. Should this or will it happen in the United States?

Look at other areas like diversity quotas. Why did they arrive? Because the companies did not do their job early enough. Be proactive and ensure that there is enough diversity within their boards of directors, their management teams, etc. And so I still believe the basis that you don’t need a government if you have dealt with the problem yourself. Unfortunately, this does not always happen. But in this case, we’re still early enough I think, to sort it out ourselves.

You have personally met with the leaders of major insurers to encourage them to sign the commitment. When you talk to them, what is their biggest concern?

It’s a question of, if I exclude clients, what does it mean for my relationships, what does it mean for my business. Because it’s true, all of these industries in question on the insurance side, on the underwriting side, are very big customers.

When we stopped investing in coal, I got quite a talk from my investment team. “Are you crazy? You will never find investments that have the same return. When I look now, five years later, we have allocated over $ 20 billion – our goal now is to go even further to 24 , $ 25 billion – we allocated that money to green investments. The return is not that different from what we would have seen in the coal business. It was the same on the underwriting side. We had to give up a significant amount of activity by no longer ensuring business use. But have you seen a drop in our gross numbers? No, you haven’t.

In 20 years, will the big insurance companies buy coal?

No need to wait 20 years for that.

Will they be released in five years?

No, but if you take us: We are completely out of coal in the OECD [Organization for Economic Cooperation and Development] by 2030 and outside the OECD by 2040. I think that in non-OECD countries too, the pressure is mounting every day. These dates will therefore probably be brought forward. I would say 10 years from now you will be away most of the time.

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