Intentions behind NZIA departures questioned
Anti-ESG politician praised insurers' departure from net zero group despite organisations reiterating their net zero commitment.
Andrew Putwainposted on Thursday, May 25, 2023
Just days after Swiss Re announced it was leaving the Net Zero Insurance Alliance (NZIA), a government official said the move was a positive example of anti-ESG efforts.
Utah Attorney General Sean D. Reyes issued a press release praising the Swiss reinsurance giant’s departure from the group.
‘ESG’, whilst not actually mentioned by name in many of the departing insurers' NZIA statements, has been used as a catch-all term in discussions around the NZIA and other climate initiatives.
"We will continue to be vigilant and take legal action where necessary to protect Americans from the dangers of ESG.”
Reyes, who described the NZIA as having an “activist climate agenda”, has made several efforts over the course of this year to remove ESG activities and investing strategies from financial services. These efforts highlighted the potential headache for institutional investors operating in the US – particularly those based in areas that have less government support for net zero, climate change reduction, and other sustainable or ESG-related goals.
Reyes released the following statement: “We are encouraged to see another company leave an Alliance that was focused on a radical environmental agenda over the interests of its clients. We will continue to be vigilant and take legal action where necessary to protect Americans from the dangers of ESG.”
“Other insurance companies appear to be realising just how problematic membership in these groups can be.”
Reyes’s office said in its press release that the Swiss Re announcement followed a 16 May letter spearheaded by Reyes and Louisiana Attorney General Jeff Landry, in addition to 21 other states, which “requested documents and information relating to legal concerns brought about by commitments from NZIA to collaborate with other insurers in order to advance an activist climate agenda”.
In the letter, the attorneys general pointed to two earlier cases of insurance companies leaving the NZIA.
“Other insurance companies appear to be realising just how problematic membership in these groups can be,” it said. “According to recent media reports, both Zurich Insurance Group and Munich Re have withdrawn from NZIA despite being two of the eight founding members of the organisation. Notably, Munich Re’s official statement announced its determination that any opportunities to collaborate without ‘exposing’ the company to ‘material antitrust risks’ were so limited that it was more advisable to work individually.”
Reyes has previously taken action against pension funds investing in ESG and joined a lawsuit against the US Securities and Exchange Commission for ESG-related activities.
ESG in the US
ESG has become a political hot-button issue in the US over the past few years with state governments engaging in several efforts to curb it.
In global surveys conducted by Insurance Investor last year, few US investment figures in insurance spoke of it being a mainstay in their operations – whereas almost all organisations operating in Europe, Australia, and the Latin American markets stressed the importance of ESG to their investment portfolios and overall operations.
The reasons for the US being hesitant on ESG are complex, but some attribute it to divergence at the state-level. In the survey, other US insurers listed factors such as the Trump presidency and his attitude to climate considerations – with actions such as leaving the Paris Climate Agreement at a time when ESG was coming to its own in other regions – as a reason for the delayed uptake in the country.
At the time of the survey last year, many believed the US would catch up to other countries under the Biden administration but contrary attitudes instead appear to have become more entrenched.
Change in operations?
As mentioned by Reyes, Munich Re, unlike the other three companies that have departed the NZIA, said possible antitrust breaches was their reason for leaving the group. The others – Swiss Re, Hannover Re, and Zurich Insurance Group – largely refused to discuss specific reasons.
Zurich did stress it thought it could more effective in achieving its net zero goals if it worked independently.
Munich Re also reiterated its commitment to sustainability when it announced its departure, saying it would fully support its future net zero and sustainability efforts in business activities and highlighting that it would retain membership of the Net Zero Asset Owners Alliance (NZAOA).
“As the combined market share of the alliance members is much lower in the NZAOA, also the antitrust risk is significantly lower in our view for Munich Re’s contribution as an Asset Owner,” said a spokesperson for Munich Re at the time. “We remain committed to our membership in the NZAOA.”
Any assertion that recent NZIA departures represent changes to a policy that supports a “radical environmental agenda over the interests of its client” - as Reyes said - appear to be misguided. There is little evidence of a group-level backing away from ESG policies in general, and the antitrust breach possibility appeared to be the bigger reason for Munich Re’s departure – as well as other DACH countries, especially after the German federal finance ministry raised concerns.
“Whilst Swiss Re has decided to withdraw from the [NZIA], our commitment to our global sustainability strategy remains unchanged.”
“Our climate commitment is unwavering. We follow scientific recommendations. To date we are decarbonising even faster than what is required to reach net zero by 2050,” said Joachim Wenning, CEO of Munich Re, in their official statement on the departure from the NZIA.
Munich Re declined to comment about whether they remained committed to ESG goals in their US operations.
A spokesperson for Swiss Re told Insurance Investor that “whilst Swiss Re has decided to withdraw from the [NZIA] with immediate effect, our commitment to our global sustainability strategy remains unchanged.”
If further insurers leave the group there could be more controversy – but the group is also adding members too.
Many still have doubts about ESG on its intellectual basis as well as its affect on fiduciary returns or a drive to treat it as any other asset class instead of a methodology.
Ultimately, these reinsurer/s have failed to control the narrative around their departures – which has since been weaponised as part of an anti-ESG agenda – despite assertions that they are indeed working to reduce carbon output. This could also damage profitability of ‘ESG’ friendly investments.
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