Coal policies of UK institutions, PPCA members criticised by Reclaim Finance.
Ahead of its annual general meeting (AGM) tomorrow, Munich-based insurer and asset manager Allianz has introduced a more restrictive coal policy and further limited its business with the oil sands industry. This follows NGO Reclaim Finance calling on members of the Powering Past Coal Alliance (PPCA) to better align themselves with a “timely exit” from coal to meet net-zero targets.
To be eligible for insurance with Allianz from 2023, companies cannot build new coal-fired power plants. Furthermore, companies are automatically excluded from insurance eligibility if they generate at least 25% of their electricity from coal or operate at least five gigawatts of installed coal-fired generating capacity.
Allianz’s new policy, effective from July, was issued alongside the firm’s 2020 Sustainability Report, which includes new targets and guidelines for its involvement with companies with carbon-based business models across investment and property and casualty insurance. Allianz said the moves were “in line with scientific recommendations for a faster reduction of global greenhouse gas emissions over the next ten years”.
The changes will impact on Czech Republic-based energy company Sev.en, which currently operates two coal-fired power plants and has a coal share of power generation “well over 50%”, Reclaim Finance said.
Companies can still be insured by Allianz if they have a clear phase-out plan that aligns them with the 1.5°C Paris Agreement target. The firm is a member of the UN-convened Net-Zero Asset Owners Alliance and has almost €2.4 trillion in assets under management.
While this is a positive next step by Allianz, Founder and Executive Director of Reclaim Finance, Lucie Pinson, said the new commitments “are not enough to honour its commitment to be a net-zero insurer and investor by 2050”.
“It has taken six years for Allianz to get to this point since it first adopted a policy on coal and the climate crisis doesn’t afford us baby steps. With COP26 looming, Allianz must go further, close all remaining loopholes on coal and say no to new oil and gas production projects,” she said.
The NGO today published a report on UK banks’ and investors’ coal exposure, noting that leading UK banks provided US$56 billion of support to coal companies between October 2018 and October 2020. Ahead of Barclays AGM on Wednesday, it was further revealed that US$27 billion of finance came from the bank.
Last week, ShareAction and 17 investors worth US$4.3 trillion also wrote to Barclays’ CEO, calling on the bank to tighten its policies on financing for coal and oil sands activity.
PPCA asset managers under scrutiny
A recent report by Reclaim Finance analysed progress made by all 111 PCCA members, concluding that asset managers such as Schroders, Legal and General Investment Management (LGIM) and UBS Asset Management “have failed to align themselves with a timely exit from the most polluting fossil fuel”.
Currently, only 20% of PPCA-aligned asset managers exclude companies that have coal expansion plans.
A Schroders spokesperson told ESG Investor that its PPCA membership “reflects [its] concern about the threat climate change poses”, adding that it recognises the coal industry is at the forefront of mitigating climate risk. Schroders said it will continue to actively engage with coal companies to help drive the energy transition.
The report found that less than half of asset manager members have an existing public policy to phase out coal, including Vanguard, PIMCO and Schroders. Only 25% of assets managed by members were covered by an exclusion policy, with BlackRock, LGIM and UBS AM’s policies applying to less than 40% of their assets.
LGIM said it has established a coal exclusion policy is engaging with energy producers to strengthen their climate strategies. “Through its Climate Impact Pledge, LGIM systematically holds companies in 15 climate-critical sectors accountable – through its votes and capital allocation – if they are falling behind in their climate ambitions and disclosures,” LGIM told ESG Investor.
A BlackRock spokesperson said that it has achieved 100% ESG integration in all of its active strategies and, in instances where BlackRock has “discretion in these strategies”, has excluded equity and bond holdings in companies generating more than 25% of revenues from thermal coal production.
In its index strategies, BlackRock aims to “provide clients choice” through increased transparency and engagement. “We ask all companies to disclose their plan for alignment with a global net zero economy by 2050,” the spokesperson said.
UBS AM declined to comment.
“A large majority of financial institutions that joined the PPCA have not taken any measure indicating a willingness to exit coal. Worse, 80% of them [continue] to invest in many companies building new coal plants, mines and infrastructures. In a nutshell: financial institutions have taken full advantage of the PPCA’s flawed framework and loose monitoring to continue feeding the coal frenzy,” Pinson said.