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Law360, London (April 30, 2020, 2:23 PM BST ) Activist groups have urged insurers to use the economic recovery from COVID-19 as an opportunity to choose investment strategies that help fight climate change, warning that the insurance industry risks repeating old mistakes if it fails to do so.
Twenty-five non-government organizations have signed a letter to insurers, published Wednesday, urging them to learn from the crisis and prepare early for the onset of climate disasters — starting with the plan to recover from the pandemic.
The group said it is calling on insurers to address the COVID-19 and climate crises together by working to ensure economic stimulus programs are consistent with limiting climate change.
"International insurance associations and many of their member bodies have made numerous public commitments about the need for rapid climate action," the letter says. "If you are serious about these commitments you now need to speak out, vigorously and publicly, at the international and national level for green and fair recovery programs."
The letter also urged governments to use COVID-19 stimulus packages to phase out fossil fuel subsidies and invest the savings in social safety nets, fund clean energy technology and support strict regulations on carbon-heavy industries.
Governments should also avoid giving any stimulus funding to companies that will not be able to operate in an economy where carbon use is discouraged.
Insurers have already responded to the call to arms.
Günther Thallinger, chief investment officer of Allianz and chair of the Net-Zero Asset Owner Alliance, whose 22 members include insurers Aviva, AXA, Swiss Re and Zurich, said the group is prepared to work with government to enact a COVID-19 recovery plan that takes into account climate risks.
"Tomorrow's recovery plans can and must lay the foundations for an irreversible shift to a resilient, net-zero and inclusive economy," Thallinger said.
The letter noted that the overhaul of economic systems in the wake of the coronavirus pandemic is a "unique chance to transform economies in ways that move the low-carbon transition forward."
United Nations Secretary General Antonio Guterres also backed a climate-conscious COVID-19 recovery last week, saying that governments should use the significant amounts of money put toward recovery to "deliver new jobs and businesses through a clean, green transition."
Peter Bosshard, coordinator of the Unfriend Coal campaign — a activist group that signed the letter — noted that insurers were aware of the risks of a global pandemic as early as 2013 but failed to prepare for it. Insurers must not repeat this mistake, he said.
Regulators are cracking down on the environmental impact of the insurance sector. The International Association of Insurance Supervisors, a global standard-setting body, set out plans in December for new rules that will govern how insurers should publicly disclose their performance on environmental and social measures, in a move toward a green economy.
But not all insurers are on board with new measures intended to fight climate change. Trade body Insurance Europe said in February that a new framework for how insurers report exposure to climate risk in their portfolios, such as whether they invest in the fossil fuel industry, should remain voluntary rather than mandatory.
--Additional reporting by Martin Croucher. Editing by Ed Harris.
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