Insurers have said to up the game on the ride

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Hello from London, where the founders of climate technology are a bit despondent. That’s the impression Simon and I got when we asked a dozen of them last week what it was like to try and scale a business in the UK.

Some have complained about the tortuous slowness of government grant approval processes and the lack of interest from venture capital in backing companies below a certain size. Others pointed out that the UK’s looser hiring and firing laws and London’s talent pool still gave him an edge.

But, wistful at the capital unlocked by the Inflation Reduction Act from across the ocean, some feared that European investors had become less interested in climate-related “hardware” companies that build high-energy carbon storage or recycling facilities technology, for example. Software startups with proven business models focused on data collection and accounting are easier to pitch.

It’s not all gloomy here. The UK has awarded its first round of carbon storage licenses to hide gas in depleted oil and gas fields off the British coast, wrote FT clean energy correspondent Rachel Millard in her busy first week. And John Thornhill argued that Europe could empowering its start-ups with “Frankensteining” Germany’s inventiveness with UK’s tax credit system and France’s financial institutions.

Today we bring you a story about the race wars at insurer AGMs. Join us tomorrow for the first day of our own Moral Money Europe Summitwhere Simon will kick things off by interviewing EU financial services chief Mairead McGuinness. (Kenza Bryan)

Insurers have hit with a range of shareholder proposals

Insurers’ performance on ESG issues is in the spotlight this year and it’s not just the climate that is worrying investors.

Shareholders are calling on US insurers Hartford, Travellers, Berkshire Hathaway and Chubb to act faster to assess human rights and racial issues and to stop underwriting new oil and gas projects, at their annual meetings this month.

Travelers shareholders will vote on Wednesday whether it should conduct a comprehensive racial equity audit of its staff and underwriting practices, after a similar proposal received 47% of votes cast last year.

Trillium Asset Management, which submitted both proposals, said the insurer had a lower percentage of people of color on its boards than any of the top 10 insurers in the United States. Blacks make up just 3 percent of its senior management compared to 18 percent of its administrative support staff, according to 2021 data.

He also highlighted an alleged discrimination in the insurance provision. A lawsuit settled by Travelers in 2018 said it denied insurance to landlords who rent to income-supported households, which are disproportionately composed of black women.

In a strongly worded response, the insurance company’s board advocated conducting an audit it would violate insurance laws in multiple US states, which “prohibit consideration of race in underwriting and pricing decisions.” He also said the audit would consume too much of the company’s time given that travelers already had a “thoughtful and comprehensive” approach to diversity and inclusion.

Marine Esperandieu, director of consultancy firm SquareWell Partners, said activist shareholders have not presented the same ESG propositions to insurers in Europe. One reason is that race is a “very US-centric topic. . . amplified by high-profile movements like Black Lives Matter,” she said.

Another factor could be that some European insurers have voluntarily adopted Say on Climate’s proposals and are taking the matter relatively seriously. As a sustainability manager at an EU-based insurer told me with some anxiety last week, “nobody has the slightest bit of confidence in assessing what the real impacts will be. . . climate science did not predict the number of extreme events happening today.”

But this is only the second year that insurers in the US have faced resolutions on the climate issue, in an “unprecedented” recognition that insurers are “society’s risk managers,” said Mary Sweeters, senior strategist of campaign group Insure Our Future. In the US S&P 500 index, three of the 10 companies targeted by climate-related shareholder proposals for the 2023 AGM season were insurance companies.

Of 15 insurers globally that have adopted oil and gas exclusionary policies, only one, Chubb, was based in the United States, he added.

This type of activism is still relatively untested ground. Shareholders submitting climate proposals must be prepared to educate others about the role the insurance industry plays, Andrea Ranger, shareholder advocate at Green Century Capital Management, told Moral Money.

The Boston-based asset manager’s proposal that insurers stop underwriting new oil and gas projects was backed by less than a fifth of the shares voted in Hartford, Travelers and Chubb last year (after all three insurers fought unsuccessfully to keep them off the ballot).

Since then, the US backlash against ESG investing has lit the fire on insurers after Texas Republican lawmaker Bryan Hughes reportedly wrote to big insurers concerned about shareholder proposals targeting the fossil fuel business.

Green Century watered down its requests this year after being told by institutional shareholders and proxy advisors that the requests should be written more flexibly. He calls for the phasing out of new oil and gas projects, rather than an immediate end to underwriting.

Chubb made headlines in March when it said it would only underwrite oil and gas projects for customers who can demonstrate plans to reduce methane emissions. A proposal by non-profit shareholder advocacy organization As You Sow for Chubb to set a goal to align underwriting, insurance and investing activities with the goal of limiting global warming to 1.5°C above pre-industrial levels was supported by 29% of the votes cast at its AGM last week.

Travelers declined to comment beyond the responses in his proxy statements. Berkshire Hathaway, Chubb and Hartford did not respond to a request for comment. (Kenza Bryan)

Smart reading

Don’t miss Henry Mance’s interview with economist Daniel Chandler, who argues that a more equal distribution of power within the workplace could they benefit both shareholders and the democracies in which they live.

Summit on moral money in Europe

Join us in London, or online, for the third edition Summit on moral money in Europe on May 23-24. Leading investors, businesses and policy makers will come together to discuss what needs to happen to unlock a more sustainable, equitable and inclusive economy.