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Summary
- The banking services major will end new insurance cover in thermal coal power plants and mines, oil sands, and new Arctic energy exploration activities by 1 January 2022.
- In the past, the company has been criticised for going slow and easy on quitting fossil fuel projects.
World’s biggest insurance market Lloyd's of London, in its first sustainability report, said that it will not provide new insurance cover for coal, oil sands and Arctic energy projects from January 2022 and will ask its members to end underwriting.
Bruce Carnegie-Brown, Chairman of Lloyd, said that it was the first time that the company had set an ESG (environmental, social and governance) strategy for Lloyd's market, which will be regarded as an important milestone for its journey towards a sustainable future.
Lloyd’s of London operates in over 200 countries and regulates 100 syndicate members. It had earlier said that it had left the decision of underwriting and investment strategy to its members. However, the Bank of England and other regulatory bodies have underlined the risks of climate change initiatives for financial institutions.
The Lloyd's Corporation said in a statement that it will ask its members to end new investment in thermal coal-fired power plants, thermal coal mines, oil sands, and new Arctic energy exploration activities from 1 January 2022. It would also phase out existing investment in companies which derive 30 per cent or more of their revenues from these sectors by the end of 2025.
(Image source: ©Kalkine Group 2020)
The Adani Controversy
Controversial projects like Adani Enterprises’ Carmichael thermal coal mine in Australia and the Canadian government’s Trans Mountain oil pipeline have been insured by the members of Lloyd. Hence, Lloyd’s was pressured by the environmental activists to take tough steps on such projects. Currently, Lloyd's market is providing insurance to the Adani Carmichael thermal coal project. Seventeen of Lloyd’s syndicates have been targeted for supporting the project.
However, insurers Brit, Convex and Hiscox are under the spotlight. They are yet to commit for ‘not underwriting’ Adani Carmichael project. Pablo Brait, campaigner at Market Forces, said that the syndicates must clarify their take on Lloyd’s new fossil fuel policy. If they were in favour of these changes, then they must phase out insuring the Carmichael thermal coal project, he insisted.
Around 28 major insurers have ruled out insuring the Adani’s Carmichael project including Axa, HDI and Liberty Mutual in 2019 and the project is now in danger.
Brait added that it is not surprising that the Adani Carmichael coal project was facing difficulties in finding insurers as it would harm the environment. The project will result in a destruction of habitat of many endangered species and clog drainage of water supplies.
Though the Asian and the US insurers have retained their exposure to WHAT, European insurers such as AXA and Zurich have pulled back from underwriting fossil fuels such as coal and oil sands.
