Global insurance companies’ initial moves to drop their investments in coal companies and stop underwriting a wider range of fossil projects are a “welcome and logical development,” the Financial Times argues [subs req’d] in an editorial published last week.
The City of London has been promoting itself as a global insurance hub with the tagline “London makes it possible,” the Times notes. “A pressing question, however, is whether there are some activities that the global insurance industry should not make possible. Climate campaigners are calling on insurers to stop providing cover for the coal industry, arguing that it is both a moral imperative and a matter of self-interest, given the rising costs to insurers of natural disasters and the havoc global warming could wreak on their business models.”
And the Times’ editors appear to agree. “It is not possible to shut down coal production overnight, without severe consequences for energy security in many parts of the world,” they write. “Countries such as Poland or India have no immediate alternative. But any responsible government should be aiming to phase out coal as swiftly as possible, especially given the rapidly falling costs of cleaner alternatives. Many insurers have already stopped investing in coal. It makes little sense to adopt a policy of disinvestment unless underwriting practices also change.”
The shift in Europe will have little impact in the United States, where insurers are operating in “a very different policy environment”, and on larger mining companies that run their own insurance operations, the editors concede. But “it will make life more difficult for smaller miners and power companies. And it adds to the sense that the noose on the coal industry is tightening, with more and more investors and financial institutions opting to cut ties.”
While the Times still sees merit in climate-oriented engagement with companies dealing in other fossil fuels, “it is hard to justify backing an expansion of coal — even on commercial grounds, given the fact that most European coal plants are running at a loss, and the risk that a clampdown by policy-makers will create billions of ‘stranded assets.’” (h/t to Arthur Girling for pointing us to this story)