This week the Laundromat was tempted to publish a blank page signifying its speechlessness in the face of ExxonMobil CEO Darren Woods’ assertion that we, and not his climate-science-denying carbon bomb of a company are responsible for the climate crisis. During its 18 month life so far NordSIP’s Laundromat has been delving with horror and fascination into the fossil fuel industry’s ongoing fight for survival. We examined the oil giants’ efforts to greenwash their way out of investing any significant portion of their record profits on genuine low-carbon energy technologies. We admired the utterly brilliant smoke-and-mirrors techniques of the oil and gas industry’s very own climate initiative and their insidiously clever de facto takeover of the COP climate negotiation process. Lately though, the Laundromat has been discovering the network of facilitators and enablers without which the fossil fuel industry would not be able to keep kicking the low-carbon transition can down the road so successfully.
All Super Villains need willing minions. Those oil producers that are actively expanding their output need large multinational banks that are happy to lend them the money they need for their projects or support them less overtly by facilitating those financial transactions. Despite signing up to initiatives like the Glasgow Financial Alliance for Net Zero (GFANZ), many banks use various accounting tricks or regulatory loopholes to keep these financed or facilitated emissions out of the public eye. The fossil fuel industry’s support network also includes the PR and advertising firms that help them with the whole smoke-and-mirrors act. Last week’s Laundromat took a look at some of the guilty parties behind these so-called advertised emissions.
New oil and gas projects also cannot go ahead without insurance cover. Such expansion plans are also proscribed by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) if we are to have any hope of staying on a 1.5-degree pathway. How are insurance companies dealing with this contradiction and are they taking steps to reduce and eliminate these insured emissions?
Thanks to longstanding in-house expertise in evaluating physical risks, the insurance industry was ahead of the curve in signalling the need for urgent climate action. Moreover, the worst effects of climate change can render assets and regions uninsurable, which means that insurers have a vested interest in mitigation efforts and investments in resilience measures. Large insurers voluntarily collaborate on environmental initiatives such as the UNEP FI Principles for Sustainable Insurance (PSI), the Cambridge Institute for Sustainability Leadership’s (CISL) ClimateWise group, and the United Nations-convened Net-Zero Insurance Alliance (NZIA). Why then did climate campaigners in 31 countries spend the week from Monday 26 February to Sunday 3 March 2024 noisily targeting insurance companies in a coordinated international protest?
The seemingly well-intentioned NZIA is now a shadow of its former self, with less than half of its original membership remaining after a mass exodus mainly triggered by politically driven anti-ESG pressures in the United States. Instead of arguing its case, in July 2023 the alliance rather pathetically offered to remove any requirements to set greenhouse gas (GHG) emissions reduction targets. As it stands insurers continue to support the fossil fuel industry both via their underwriting of new extraction projects and investments in fossil fuel-related securities. The UN’s latest Production Gap report revealed that fossil fuel companies are on track to generate 460% more coal production, 83% more gas and 29% more oil by 2030 than the levels consistent with Paris Agreement targets. It is this blatant disregard for climate action that spurs climate campaigners towards the fossil industry’s support network – in last week’s case the insurance companies.
In its 2021 study of 70 large insurance companies, UK non-profit ShareAction found that only 40% of the insurers carry out climate scenario analysis on their investment portfolios, with only 39 per cent of P&C insurers including it in their underwriting activities. The NGO also found that while some insurers had implemented exclusions on coal, tar sands, shale oil, and Arctic oil, most were continuing to support the conventional oil and gas industry. ShareAction is currently working on an update to this study, which will hopefully reveal some progress. The week-long protest against the insurance industry was coordinated by campaign group Insure our Future. Among the projects that it has been targeting is the East African Crude Oil Pipeline (EACOP), a joint venture by France’s TotalEnergies and the China National Offshore Oil Corporation. So far, only a few companies have resisted the pressure to rule out support for the project, which is expected to facilitate 34 million tons of annual CO2 emissions once completed. It also stands to damage local biodiversity and greatly disrupt adjoining communities.
Efforts by the Partnership for Carbon Accounting Financials (PCAF) to improve the carbon footprint transparency of the insurance industry have come under criticism. The proposed guidance on Insurance-Associated Emissions only recommends the inclusion of Scope 3 GHG emissions and makes no reference to fossil fuel project construction risk. Climate campaigners have also pointed to weaknesses in the methodology, with emissions weighted according to the cost of insurance cover rather than the value of the underlying project.
While some individual European insurance companies such as AXA and Allianz are making some progress in ESG terms, the industry as a whole is still considered to be failing to address the urgency of the climate and biodiversity crises. Along with the fossil fuel industry’s financiers, who last year were named and shamed by the United Nations, insurers provide essential life blood to the oil and gas industry’s expansion plans. Until they start to demonstrate credible moves to curtail their support, they will unfortunately have to contend with yet more disruption from increasingly agitated climate campaigners. Perhaps more damaging could be mounting pressure from institutional shareholders as asset owners become more aware of insurers’ role in compounding the climate crisis and making a mockery of their net-zero commitments.
