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: Influential fund manager Green Century tells insurers to drop Big Oil

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Green Century Capital Management tried to use shareholder muscle to persuade at least a trio of insurance companies to drop fossil-fuel clients.

So far, the insurance firms aren’t biting; all three have filed no-action requests with the Securities and Exchange Commission.

The resolutions, in advance of proxy season this spring, call on Chubb
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,
Travelers
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and The Hartford
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to take this bold step as private-sector efforts to curb global warming from the burning of coal, oil
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and gas
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pick up, alongside global government action.

The insurance resolutions represent the first time that shareholders have laid down this sizable challenge to this industry for what the activists say are its contributions to the climate crisis

Companies are facing climate-change quandaries increasingly at the behest of institutional investors, such as activist asset managers, hedge funds and pension funds, and by advocacy groups speaking on behalf of smaller shareholders.

Opinion: Activist shareholders are pushing companies to embrace ESG and other social causes. But one big question is still unanswered.

More than nine shareholder campaigns based on environmental or social issues are currently underway, impacting companies such as Unilever PlcUL and Costco WholesaleCOST, according to Bloomberg Intelligence, which said the pressure has heated up from last year. Green Century has a $5.9 million stake in Costco, as of January.

Read: Influential New York pension fund will drop fossil-fuel stocks, put pressure on utilities and auto makers to cut emissions

The insurance resolutions call on each company’s board of directors to “adopt and disclose new policies to help ensure that its underwriting practices do not support new fossil fuel supplies, in alignment with the International Energy Agency (IEA)’s net-zero emissions by 2050 scenario.”

Watchdog IEA has concluded that there is no room for any fossil fuel expansion if warming targets are to be met, and climate catastrophe avoided.

“Investors are demanding that insurance companies stop supporting the rampant expansion of fossil fuels that is driving the climate crisis,” said Elana Sulakshana, senior energy campaigner at Rainforest Action Network, an environmental advocate that tracks financial services relationships with companies it believes hurt the Amazon rain forest and other areas.

“But instead of taking concrete action to limit fossil fuel insuring and investing, Chubb, Travelers and The Hartford are trying to silence their shareholders and continue business as usual,” she said.

Read: A dirty secret: Here’s why your ESG ETF likely owns stock in fossil-fuel companies

“We regularly engage in open dialogue with our shareholders and value their perspectives. The Hartford gives each shareholder proposal a thorough review and due consideration,” Matthew Sturdevant, a spokesman for the The Hartford, said.

“We view the transition to a greener society as a business imperative and are proud of our progress,” he said, in response to Green Century’s claims. “Our long-standing commitment to sustainability is demonstrated by our actions across the business including sustainable products, transparent disclosure of climate-related goals, risks and operational impacts, and investments in renewable energy. “

Green Century, which has about $1 billion under management, is a left-leaning investment firm championing environmental and other causes, according to InfluenceWatch.org. Green Century is owned by Paradigm Partners, a for-profit holding company investment advisory service firm founded by Public Interest Network president Doug Phelps.

In its no-action request, Chubb, for one, pointed to its policy restricting insurance for new coal projects. Chubb, meanwhile, is backing expansion of offshore oil drilling in Brazil, Green Century said in its resolution.

Chubb has also said it will not make new debt or equity investments in companies that generate more than 30% of revenues from thermal coal mining or that generate more than 30% of energy production from coal.

The insurer also says the energy landscape will be changing, saying it “expects a transition over time to greater reliance on alternative and renewable fuel solutions to meet energy needs.”

Travelers and The Hartford have coal and tar sands exclusion policies, but do underwrite policies for other fossil fuels.

Chubb’s share price is up 23% over the past year, while The Hartford is up 42% and Travelers up 16%.

Read: BlackRock’s Larry Fink warns that oil assets will shift to private hands to avoid scrutiny — and that’s ‘greenwashing’

Investor attention to the role of insurers in climate change has increased significantly in recent years, in part due to rising insured costs related to natural disasters worsened by climate-change effects. For instance, the U.K.’s largest asset manager, Legal & General, divested from AIG in June 2021, citing the insurer’s coal underwriting.

Natural disasters cost insurers $105 billion in 2021, the fourth highest loss since 1970.

Related: Climate change fueled 3rd costliest losses ever in 2021 — less than half of that property was insured

In a note, Societe Generale analysts said that exiting coal can add billions to the value of insurers’ stock, and that exiting oil and gas could provide an additional “green premium.”

Chubb and Travelers have also challenged resolutions filed by the shareholder advocacy firm As You Sow that requested a plan for emissions reductions in line with a net-zero pathway.

Financial services more broadly are under the watchful eye of environmental groups.

Citigroup
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earlier this year said it aims for an “absolute reduction” in emissions from companies across its energy loan portfolio of 29% by 2030. It was a big move in the banking space. Citi did stress that dropping oil and gas clients if they are deemed to fall short of such targets would only be a last resort, however.

Read: Major banks still tagged for funding Amazon rainforest destruction

But boardroom advocacy on climate change stretches beyond financial services.

Green Century and As You Sow claim their shareholder proposal was also behind a recent move at Coca-Cola
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to reuse more plastic. Coke said earlier this month it will sell 25% of its beverages in refillables by 2030, up from a current 16%, a move that As You Sow called “industry-leading.”

And last year, hedge fund Engine No. 1 scored a coup in winning three climate-focused, independent seats on oil giant ExxonMobil’sXOM board.

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