UK insurer commits to considering ESG issues in all investment decisions
UK insurer Aviva will sell the shares it holds in coal companies unless they prove they are making progress to reducing their carbon footprint to help ease the effects of climate change over the next year.
The insurer says it has identified 40 companies that derive at least 30 percent of their revenue from coal power generation or coal mining and will give them a year to prove they will work toward cleaning up their operations.
‘Where we think a company is not making sufficient progress towards the engagement goals set, we will divest,’ Aviva chief executive Mark Wilson said in a speech in London. ‘The once in a century weather events cost us about £100 mn ($155 mn) per event before reinsurance and they are becoming more frequent. In fact in 2013, we had two such once-in-a-century events in Canada. That is the sort of thing that concentrates a chief executive’s mind.’
Wilson made the comments while launching a report Aviva commissioned from the Economist Intelligence Unit on the potential cost to investors of climate change. The report concludes that climate change will inflict massive losses on investors across their entire portfolio, even if they shift away from asset classes considered vulnerable, through slower growth and lower asset returns alone.
‘If we don’t tackle climate change and temperatures rise by 6 degrees, the value at risk – roughly speaking the value of global assets – will decline by up to $13.8 tn for investors,’ Wilson said in his London speech. ‘And for governments it climbs higher – to $43 tn – if temperatures rise by 6 degrees.’
Divestment is one of five points in Aviva’s strategy to fight climate change. The company says it also plans to invest $3.9 bn over the next five years in low-carbon infrastructure, push for a solid greenhouse gas reduction goal at UN-sponsored climate talks in Paris in December and ‘actively engage with companies to achieve climate-resilient business strategies.’
The company says it will also continue to commission and publish research on ESG issues and ensure they are taken into account in its investment decisions.