(Bloomberg) – The world’s largest climate finance coalition has spoken out against increasingly aggressive political attacks on ESG after threats from the Republican Party sparked a mass exodus from an insurers sub-alliance.
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“These political attacks are now disrupting insurers’ independent efforts to price climate risk, which will hurt policyholders, key investors and the local economy,” a Glasgow Financial Alliance spokesman for Net Zero told Bloomberg.
The comments follow a series of departures from GFANZ’s sub-group, the Net Zero Insurance Alliance. Allianz SE, Axa SA and Scor SE all left NZIA on Thursday after several founding members, including Munich Re, had already left. People familiar with the companies’ thinking said the escalating anti-ESG campaign in the US, which specifically targeted insurers this month, was behind the moves.
The United Nations Environment Programme, which convened the NZIA in 2021, said the development should be seen “in the light of recent discussions in the United States”. QBE Insurance Group Ltd., Sompo Holdings Inc. and Mapfre SA have also joined the list of defectors from New Zealand.
GFANZ, made up of coalitions representing all sectors of the financial industry, including banks, wealth managers and asset owners, has signaled that Republican intimidation tactics will not dilute their goals.
“Despite these political headwinds, we will continue to support insurers’ efforts to manage climate risks and develop transition plans,” the Allianz spokesman said.
The NZIA turmoil, which accounted for about 15% of global insurance premiums at its peak, has proved a victory for members of the GOP determined to wipe environmental, social and governance metrics off the financial map. In a May 15 letter, attorneys general from 23 US states said they were “concerned about the legality” of the NZIA and linked the alliance to “record-breaking” inflation.
The story goes on
Senior members of the GOP were quick to celebrate the NZIA’s plight. Utah Attorney General Sean D. Reyes said in a statement that he and his colleagues were “encouraged” to see the move away from “an alliance that was focused on a radical environmental agenda over the interests of its customers.” We will continue to be vigilant and take legal action where necessary to protect Americans from the dangers of ESG.”
Gunther Thallinger, chair of GFANZ’s Net Zero Asset Owner Alliance sub-group, says climate finance groups and their members need to make the general public better aware of exactly how much is at stake.
“All of us who are really committed to fighting climate change have failed to tell the story to those affected,” he said in an interview. “There are people out there who actually think this is not a threat nor does it need to be worked on, and here we have to be very clear that our messages, signals and narratives need to be improved: we need to reach those people. “
He also said an important part of that message needs to highlight the extent to which climate finance can protect against the losses that would inevitably hit companies and investors who were unprepared.
“Clearly, investors clinging to the old regime while ignoring the considerations of the sustainability developments of economic transformation have missed part of the picture,” Thallinger said.
For observers, there is a risk that the crisis in New Zealand will become a decisive moment. Should the alliance now completely implode, it would be “a huge disappointment to those who wanted a collaborative approach to goal setting,” Miqdaad Versi, founder of the sustainability practice at Oxbow Partners, a consulting firm specializing in insurance, told a LinkedIn post. It would “pose a major hurdle for cooperation in this area,” he said.
Since Munich Re quit the NZIA at the end of March citing “significant” legal risks, the group has been struggling to stop other members from making their way to the door. But there are still some of the more prominent signers who stick around. And according to the group’s website, it still has around 22 members, including big names like Aviva Plc.
A spokesman for the UK insurer said: “The NZIA has played an important role in developing the critical standards and frameworks to enable insurers to reach net zero.” We are saddened by the recent developments and will consult with the UN and other members work together to find an orderly solution. We remain fully committed to our goal of becoming a net zero company by 2040.”
In addition, many of the firms that have left the Alliance of Insurers remain members of the Net Zero Asset Owner Alliance, including the Allianz of which Thallinger is a board member.
“The economic transition that we are going to see and are already in is a big macro cycle,” he said. “The next three decades will be clearly defined by this change.”
Michael R. Bloomberg, the founder of Bloomberg News parent company Bloomberg LP, is co-chairman of GFANZ with former Bank of England Governor Mark Carney.
(Adds that Mapfre also leaves NZIA in the fourth paragraph.)
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