Exactly one year ago at their 2015 AGM, IAG’s executives seemed genuinely annoyed by questions related to climate change. This was despite the fact that natural disaster claims in 2014/15 were in excess of $1 billion. Clearly the steady increase in the cost of natural disaster claims weren’t viewed through the lens of climate change by IAG’s former leadership team.
IAG has undergone somewhat of a transformation since then. The new chair Elizabeth Bryan, and new CEO Peter Harmer, have brought in a much needed fresh approach. In its annual report, IAG stated its support for the 2015 Paris Agreement to limit the global average temperature rise to well below two degrees, and accordingly refreshed its position on climate change to reflect this development.
Ms Bryan dedicated over two minutes of her opening remarks to highlight the impact climate change was having on IAG through the increasing rate and severity of natural disasters, which scientists are advising are climate change related. Ms Bryan estimated that IAG’s exposure to emissions-intensive industries in their investment portfolio was less than 0.5%. In its underwriting business, their only exposure to the fossil fuels sector was via worker’s compensation policies. Ms Bryan stressed the importance of climate change, and the contributions IAG has made over a decade to the discussion, and the need for action. Her remarks were strikingly different to those of Mr Schwartz just twelve short months ago.
When pressed by Macquarie University academic Ben Spies-Butcher if the company’s two degree commitment would result in divestment from coal, for instance, Ms Bryan reiterated that IAG’s exposure was very small. However, she expected that her investment team would be prudent enough to protect their exposure from declining industries like coal. Perhaps this was a sign that IAG may be considering a divestment announcement in the short term?
Dr Spies-Butcher then asked that as IAG was the only Australian insurer taking climate change seriously, if there was a marketing opportunity for IAG to present itself as a “climate friendly” insurer. This clearly struck a chord with the board, and may present itself as the catalyst for IAG making that divestment decision.
Market Forces campaigner Dan Gocher applauded IAG’s commitment to two degrees, but urged the CEO Peter Harmer, to make a public statement on the need for a price on carbon, as his predecessors, Michael Hawker and Mike Wilkins had done in 2007 and 2010 respectively. Mr Harmer restated IAG’s involvement in international climate forums, and added quite surprisingly, that the company was actively considering their public position on carbon pricing.
Dan Gocher then questioned the climate change policy of the Insurance Council, particularly given that IAG now holds the presidency, through its Chief Operating Officer, Mark Milliner. Mr Milliner replied that the policy was relatively new, and was open to ideas about how the Council could improve its communications on climate change to the public.
Finally, Peter Penn asked the board how they could best communicate the impacts of climate change and the need for action to the general public. Ms Bryan replied that the company had reconsidered their communications about climate change, and affirmed that within a year, Mr Penn would see a vast improvement on that front.
IAG is taking the right approach to climate – it is proactive, considered, and most importantly, transparent. However, there is more to be done. IAG understands the benefits of being seen to be green, but to do so, it must send the market a signal by progressively divesting from fossil fuels. In addition, its advocacy on emissions reduction policy is both necessary and overdue. One year ago, we asked IAG to provide leadership on climate change, and they clearly are doing that. IAG are streets ahead of their domestic competitors, but they still have some way to go to catch up to their European peers.