Transparency is Key
In another example of which way leadership can go, Chubb Limited released preliminary voting results from its annual general meeting where a majority of shareholders voted in favour of a greenhouse gas reduction proposal filed by investor representative As You Sow.
The resolution asks Chubb to issue a report on how it intends to measure, disclose and reduce the greenhouse gas emissions associated with its underwriting, insuring and investment activities, in alignment with the 1.5C climate goal. A similar vote at insurer Berkshire Hathaway recently received support from more than 47 per cent of independent shareholders.
“This high vote should be a wake-up call to Chubb and other large insurance companies,” said Danielle Fugere, president of As You Sow. “Chubb can no longer ignore its role in financing high carbon activities. The climate risk associated with its underwriting and investing has become unacceptable to investors, who now seek action from Chubb to reduce its significant contribution to climate change.”
Chubb is one of the largest underwriters of high-carbon companies. According to an Insure Our Future report on insurers’ exposure to the oil and gas sector, Chubb is one of the top providers of coverage to the oil and gas industry, surpassing peers such as The Hartford and AXA.
Additionally, Chubb’s bondholding and shareholding in coal alone amounts to $195 million. Chubb currently addresses only its Scope 1 and 2 operational emissions, which covers emissions from electricity used in its offices and travel, among others, but ignores the vast majority of its financed greenhouse gas emissions.
“By not addressing its financed emissions, Chubb continues a cycle of supporting activities that harm its own bottom line and increases risk for investors,” Fugere said.
Chubb is falling behind peers in the global insurance industry that are increasingly embracing Net Zero commitments. AIG and The Hartford recently committed to reaching Net Zero emissions from their underwriting and investment portfolios by 2050 or sooner, following shareholder proposals filed by the Presbyterian Church (USA) and As You Sow respectively.
And members of the Net Zero Insurance Alliance have made an overarching commitment to reach Net Zero emissions from their insurance and reinsurance underwriting portfolios by 2050. The Net Zero Insurance Alliance currently has 25 members, seven of which are in the top 30 largest global insurers by market cap.
Once again, which path represents best leadership practice? Truthfully calling out Net Zero or continuing to underwrite high carbon clients for short term profit?
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The Final Word
Writing for Forbes, Talal Rafi, a World Bank Ambassador (GYCN) on climate change says a corporate strategy focusing on sustainability can add brand value, meet consumer demands, increase efficiency, attract valuable talent and create new opportunities.
Further, “A strong sustainability proposition can help companies tap new markets and expand into existing ones. China’s initiative to fight air pollution is to create investment opportunities worth more than $3 trillion through 2030.”
Plus, according to McKinsey, a sustainability strategy can reduce costs substantially and can affect operating profits by as much as 60 per cent.
All these truths are known. But it remains something of an unknown how truthful corporates as a whole are willing to be on sustainability leadership – and without this truth, none of the valuable advantages of sustainability can reach their potential.