Naturesave insurance is campaigning for insurance divestment. What does that mean and why does it matter? The insurance industry has a significant influence on the energy industry. And as we know, the energy industry has a significant impact on climate change. And climate change matters.
Before sustainability and climate change were even fashionable terms, Naturesave insurance was running their business in a sustainable way. For almost thirty years, they have been providing ethical insurance.
- home and travel insurance,
- business insurance,
- insurance for renewable energy projects and
- insurance for charities and non-profit organisations.
Naturesave views each aspect of the business through the lens of environmental and social governance. 10% of the business’s income and 10% of any green travel premium goes into the Naturesave Trust to fund green projects. A tree is planted for every policy taken out. They choose their insurance partners carefully. They provide free education to businesses on how to become more sustainable and provide pro-bono advice to charities. Naturesave are living wage employers and are a carbon neutral business. But that is not all.
One of the projects that Naturesave is passionate about is making sure that the insurance industry acts on climate change.
Fossil fuel reduction
We know that to make a difference to the rapid rate of climate change, we need to stop using fossil fuels. Fossil fuels include coal, petroleum, natural gas, oil shales, bitumens, tar sands, and heavy oils (Britannica).
1.5°C above pre-industrial levels is the ideal target of the Paris Agreement. To meet this goal, countries worldwide need to cut production of coal, oil and gas by 6% year on year for the next decade (Insure Our Future PDF). The only way to meet that limit is to stop new projects that will increase fossil fuel production. But, new projects are still underway.
According to the UN Production Gap report, countries are planning average increases in fossil fuels of 2% each year. This means they will not decrease use of fossil fuels and they will not meet the target of 1.5°C by 2030. Instead, current projections would put increases for coal at 240%, oil at 57% and gas 71%.
What part do insurers have to play in changing fossil fuel projects?
Large insurance firms continue to support fossil fuel projects. The Ferret found that 22 of the world’s biggest insurers invested £6.3 billion into drilling projects in the north sea (oil and gas) over a period of five years to 2021.
Naturesave estimates that the insurance industry makes investments that equal 25% of the UK’s net worth. They could use these investments to influence green energy projects, but why would they?
How climate change will affect the Insurance industry
An estimated 75% of UK consumers would pay more for an energy provider that funded clean energy projects and avoided fossil fuels (Compare The Market in Naturesave’s Insurance Climate Change Challenge report PDF). This change in consumer attitude is likely to impact the insurance industry too. Consumers are more aware of climate change. They are starting to look at where their financial investment goes.
Another incentive for Insurers is that they are at greater risk. The Bank of England has said “The risks from the physical effects of climate change, as well as the transition to net zero, pose a threat to the stability of the wider financial system, and the safety and soundness of firms we regulate.”
Insurers are facing more claims derived from natural disasters. For example, Aviva estimates that one in five UK properties are now at risk of flooding (The Ferret).
Insurers are making changes. 18 insurance companies have committed to aligning their underwriting with a 1.5°C pathway as members of the Net-Zero Insurance Alliance (The Actuary). But although the insurance industry has taken action on coal projects, it continues to provide oil and gas project insurance (insure Our Future).
More changes need to be made to align the insurance industry with climate change goals. Naturesave’s campaign for insurance divestment brings together the two main areas of fossil fuel production and climate change risk. To find out more about the campaign (or to buy insurance!), visit Naturesave.