Home > Suncorp and IAG not closing fossil fuel policy gaps

Suncorp and IAG not closing fossil fuel policy gaps

22 October 2021

22 October 2021

Amidst ever-worsening extreme weather and the hits to their bottom lines it is causing, two of Australia’s three big insurers faced shareholders at their annual general meetings (AGM) recently (IAG was today, Suncorp on September 23rd). Over the last two years both have taken significant steps away from supporting coal, oil and gas in their underwriting (insurance) and investments due to the contribution of these polluting industries to the climate crisis and therefore the aforementioned extreme weather. 

Suncorp Chairman Christine McLoughlin made it clear at the beginning of its AGM that the climate crisis was the number one ranking material issue for Suncorp. She said acting on climate was essential to preserve economic stability and keep insurance affordable.

However, under questioning from shareholders neither Suncorp or IAG addressed how they would close the remaining gaps in their fossil fuel policies.

Suncorp still open to insuring oil and gas pipelines and gas-fired power stations

Back in 2019, Suncorp announced it would phase out its underwriting exposure to thermal coal by 2025, a move which was complemented in 2020 with a similar commitment on oil and gas. Investment exposure to oil and gas companies is being progressively phased out, based on the emissions intensity of the producer, reaching zero by 2040.

However, for two years in a row shareholders have raised the question of the glaring gaps in Suncorp’s policies, namely, that the underwriting restrictions do not address gas-burning power stations and midstream infrastructure such as pipelines and LNG terminals. For two years in a row, the Chairman has failed to answer the question, just repeating Suncorp’s existing commitments.

IAG not screening bond investments and maintains narrow definitions

IAG’s 2021 climate-related disclosure statement shows the carbon intensity of its listed equity investment portfolio has continued to fall, consistently, for the last four years. However, 88% (as of 30 June 2021) of its investment portfolio is in cash and fixed interest (bonds). With an increasing number of banks refusing to lend to thermal coal companies, many, such as Adani Group and Whitehaven Coal, are looking to the bond market for debt. One shareholder wanted to know whether IAG was screening its bond investments.

CEO Nick Hawkins explained that any direct exposure to corporate bonds outside the big four Australian banks would be “very small”, but that he would look into it further. From that answer it seems that bonds are currently not screened.

Another shareholder pointed out the gaps in IAG’s underwriting restrictions. IAG has committed to phasing out insurance for companies that are “predominantly in the business of extracting fossil fuels and power generation from fossil fuels by 2023”.

However, “power generation from fossil fuels” is wrongly defined as only coal-burning and excludes gas, while “predominantly in the business of” is defined as companies undertaking 30% or more of their activity in fossil fuel extraction or coal burning. Transportation of fossil fuels is explicitly excluded from this policy.

IAG did not commit to closing these gaps in its underwriting restrictions, only saying it would get back to the shareholder that had asked the question. Outgoing Chairman Elizabeth Bryan did agree that gas is indeed a fossil fuel, adding “I don’t know how we missed that one”.

Despite gaps, both insurers are still ahead of QBE

While Suncorp and IAG still have a long way to go to match their climate rhetoric with actions, they are still far ahead of the other major Australian insurer, QBE. QBE’s updated environmental and social risk framework, which it released in February 2021, placed no serious restrictions on its oil and gas underwriting apart for tar sands.

This puts QBE completely at odds with the climate goals of the Paris Agreement (which it claims to support) and its own interests as an insurance company.

Take action: ask QBE to catch up to its competitors and rule out insurance for climate-destroying oil and gas.