US insurers have lowest ESG credentials: report

London

AMERICAN International Group, Nationwide Mutual Insurance and Genworth Financial are among insurers with the worst environmental, social and governance (ESG) credentials, according to a report from nonprofit ShareAction.

The US companies, together with China's Ping An Insurance Group and People's Insurance Company (Group) of China, received the lowest scores from ShareAction in what it says is the first ranking of global insurers on their approach to governance, climate change, biodiversity and human rights.

France's Axa was ranked first, followed by Germany's Allianz, though none of the 70 insurers, which oversee a total of US$22 trillion of assets, were given top marks with the nonprofit saying ESG policies and practices in the insurance industry lag behind those adopted in other financial sectors.

With the world facing rising temperatures and a rapid decline of biodiversity, as well as greater public attention on issues of systemic justice, insurers can play an important role in assessing and managing risks and they can also contribute to risk prevention. Still, in most cases, ShareAction found they weren't doing enough to address these issues.

"Insurers are better placed than any other type of financial institution to exert pressure on unsustainable companies, as firms cannot operate without insurance," said Felix Nagrawala, one of the report's authors, in a statement "But they are largely failing to use this influence. Despite the sector's supposed expertise in managing risk, insurers continue to ignore the systemic risks of climate change and biodiversity loss."

Overall, there is a lot more insurers can do. The report found that about 15 per cent of the assessed insurers have policies to restrict underwriting of tar sands, shale oil or Arctic oil exploration, some of the most carbon-intensive energy sources, while none set biodiversity targets such as around deforestation.

Only 13 per cent have policies that exclude investment in companies that are knowingly in breach of human and labour rights, and just 17 per cent had a board member with sustainability-related expertise.

Still, when they choose to, insurers can make a big impact on these issues.

For example, Axa is dropping German energy giant RWE as a client because the utility's coal operations are too large and it's moving too slowly to shrink its carbon footprint, people familiar with the matter said in March. BLOOMBERG