Insurance companies are apparently in financial trouble and need to raise rates and weaken price gouging protections in high-risk states like California. Not so fast, say the New York Fed
Welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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Won’t somebody please think of the insurers?
Insurance companies are apparently in financial trouble and need to raise rates and weaken price gouging protections in high-risk states like California. Not so fast, say the New York Fed, who’ve released a new study that debunks the notion of an underfunded insurance industry, and finds that the largest property insurers have enough capital to cover expected losses from climate-related disasters. What’s more, companies like Farmers Insurance Group, Allstate, and State Farm, collectively hold almost $40 billion in fossil fuel investments. These insurers are complicit in creating the very risks they want to charge customers more to cover. And by investing in fossil fuel assets with little future, they may actually face real financial distress in the not-too-distant future. Before insurers shift the cost of climate disasters onto consumers through higher premiums, they might want to get their own house in order.
Big six's $266B fueling fossil frenzy
A new research brief by the Sierra Club’s Fossil-Free Finance campaign reveals a hidden pipeline for fossil fuel financing through the banks’ underwriting of bonds and equities for polluting companies. While banks often focus solely on lending and downplay the importance of capital markets in their climate strategies, the report reveals why this is such a massive oversight. Since 2016, top US banks underwrote $266 billion in new bond and equity issuances for 30 of the top fossil fuel expansion companies. The underwriting of bonds and equities accounts for nearly two thirds (61%) of these banks' financing for fossil fuel expansion. The analysis raises important questions about how the six biggest US banks calculate and report on their facilitated emissions, and makes the case for the importance of banks’ capital markets activities in achieving real-world emissions reductions.
Crude move
Saudi Aramco CEO Amin Nasser has joined BlackRock's board, signaling the asset manager's commitment to the oil industry. Nasser has been an outspoken critic of sustainable investing, claiming ESG-driven policies that limit fossil fuel investment create global energy security risks. NYC Comptroller Brad Lander lambasted the decision, saying “BlackRock shareholders expect climate-competent, not climate-conflicted, directors.” Contrary to conservative victory cries, this move presumably wasn’t in response to Republican attacks on sustainable investing and won’t help red state drillers. Instead, the world’s largest oil company and BlackRock stand to benefit. BlackRock needs leadership that understands risks, opportunities, and future realities rather than vesting trust in someone who wants to uphold and profit from destructive industries.
GOP turns heat on asset managers, EU puts chill on ESG slackers
After two weeks of hearings attacking investor freedom and denying climate change, the financial services committee is planning on marking up legislation this week targeting climate and environmental, social, and governance (ESG) risk management and disclosure. Meanwhile, inquiries into the financial sector's efforts to fight climate change continue. Oversight subcommittee Chair Rep. Bill Huizenga (R-MI) shot off another letter with a series of questions regarding shareholder proposals, proxy voting, and responsible investing fund performance to ten asset managers. Not to be outdone, Indiana’s Republican attorney general issued a subpoena for asset managers work on climate change. How far Republicans are willing to escalate could be determined by how asset managers respond. BlackRock’s recent effort to appease climate-denying Republicans only left them hungry for more. Confused companies and investors are also facing a different, more serious challenge, as the European Union has begun cracking down on climate and ESG laggards.
On our radar
As You Sow: www.investingesg.org - a new research and educational resource, updated daily with curated commentary, influencers, policies, and research on ESG.