Insurers lag pension funds on climate risk, study shows


first_imgAccording to the AODP’s analysis, insurers lag behind pension funds when it comes to climate risk management, engagement and low-carbon investment.Julian Poulter, chief executive at AODP, said climate change posed “a double threat” to the insurance industry.“Insurers face mounting costs from claims relating to the impacts of climate change, and the investment portfolios that enable them to meet those claims are exposed to climate risks as the transition to a low-carbon economy accelerates,” he said.The AODP said there was a risk of “systemic failure”, with potential catastrophic effects on the wider economy given “the relatively few insurers currently taking action” on climate risk. In the not-for-profit organisation’s recent Global Climate 500 Index, 26 pension funds were rated A+ on managing climate risk but only one insurer, the UK’s Aviva.The next highest rated insurers were France’s AXA, rated BBB, and Germany’s Allianz, rated B.The AODP said that, across the index, one in eight insurers were taking tangible action to manage climate risk in their portfolios, compared with one in four pension funds.However, more insurers than pension funds recognise climate risk as an issue, and there are big regional differences, the AODP added.“European insurers are setting the standard when it comes to managing the risks of climate change in their investments,” it said.Nearly one in four insurers in the EMEA* region, with 41% of regional insurance assets, are taking tangible action on climate risk. Half recognise climate risk but are taking little action, according to the AODP. One-quarter of European insurers “do nothing”, providing no evidence of addressing the issue.Overall, the AODP considers that insurers are exposed more to climate risk than pension funds because a greater proportion of the former’s investments are in fixed income.This, according to the AODP, means they are dependent on rating agencies, “who are only starting to reassess this risk”.*One of the insurers in this region in AODP’s analysis is in South Africa, the others are European European insurance companies lead the industry when it comes to tackling climate risk in investments, although, overall, the insurance industry lags “way behind” pension funds on this, according to the Asset Owners Disclosure Project (AODP).It came to this view on the basis of its annual index rating the world’s 500 largest asset owners on how they tackle climate risk in their portfolios, and a special study that compared insurers with pension funds.Specifically, this insurance sector analysis compared 116 insurers, with $15.3trn (€13.9trn) of assets under management, (AUM) with 324 pension funds with $15.9trn of investments.This comparison covered 80% of the $38trn of assets covered by the AODP’s annual index of the top 500 asset owners globally.last_img

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