War on ESG is Driven by Fossil Interests

March 7, 2023


Insurers are already on the front lines of climate change. Now they’re getting their turn on the front lines of the anti-ESG movement.

Lawmakers in red states like TexasNorth Dakota and South Dakota are trying to bar insurers from weighing environmental, social and governance factors in writing policies.

On the other side, activist shareholders and blue states are trying to limit insurers’ investments and underwriting in oil and gas projects. A bill introduced last month in Connecticut would establish a surcharge on insurers that underwrite fossil fuels.

For an industry that’s based on evaluating and pricing risk, it’s all a little rich.

“ESG is in the DNA of any insurance company,” said Michel Leonard, chief economist and data scientist at the Insurance Information Institute. “It would be very difficult for the insurance industry to insure in an economically viable and sustainable way without paying attention to environmental patterns.”

Republicans are using the same argument as they have in their attacks on other firms in the financial services industry — that ESG risks aren’t material to companies’ bottom lines and are instead a political calculation designed to appeal to the left.

“We don’t want to destabilize the entirety of the insurance industry by injecting a bunch of non-actuarially sound principles,” said Texas Rep. Tom Oliverson, vice-chair of the state House’s Republican caucus, who has introduced a bill to bar insurers from considering ESG scores or diversity, equity and inclusion factors when setting rates.

The insurance industry is resisting, arguing that such legislation undermines their business practices and could prompt the sort of instability that Oliverson is warning about. Insurers note that considering climate risk helps them deal with things like stranded assets and high costs for disaster cleanups. And they regularly consult things like credit ratings and ESG scores that account for such risks — 85 percent of global insurers believe ESG will impact all functions of their business, according to a recent survey from PwC.

Doug Abraham, a lobbyist for the APCIA, testified last month against a South Dakota bill that would bar financial companies and insurers from denying services to someone using anything other than “impartial risk-based financial standards,” arguing that it would boost insurance rates across the state and cause insurers to go bankrupt.

The APCIA also opposes the Connecticut bill, writing in public comments that “states shouldn’t be using tax policy to try to prevent insurance coverage for disfavored industries.” The group warned that the legislation could also hurt people’s ability to recover damages from the fossil fuel companies that would be affected.

“Do we find it chilling when we see these laws? Well, we find it confusing,” Leonard said. Industry confusion “could turn very rapidly to severe significant concerns,” he said, if the bills passed and were interpreted to prevent looking at weather patterns. “Then we would be wondering whether we can even keep insuring in some of those markets.”

Below, Josh Pearce PhD on the fossil fuel industry’s risk exposure.


2 Responses to “War on ESG is Driven by Fossil Interests”

  1. J4Zonian Says:

    At least 7 million people die every year from air pollution, overwhelmingly caused by fossil fuels. Tens or hundreds of millions more are disabled mentally or physically for life, sometimes in utero. A clear link has been established between proximity to fossil fuel burners and low-birth weight with all its effects, as well as hundreds of other life-threatening conditions, & as Pearce, Michael Mann, Gavin Schmidt, & many others say, attribution science is getting more accurate every year.

    Fossil fuel executives & political operatives will also be as legally liable as they are now morally liable, for every one of those deaths & injuries. Hundreds of thousands now, soon hundreds of millions of felony murders for those who committed fraud, SEC violations or other crimes linked to fuels, deadly pollution, & science denial. Personally, I hope the threat of being in prison for life makes them consider a deal—accept the terms of a truth & reconciliation process: confessing everything, turning over all information & documents, giving up all gains acquired while working for the criminal enterprise.

    [Take a breath before proceeding:] Further, as is rumored about FDR, the New Deal, & the business plot, the guilty parties throughout the right wing—not just in fossil fuel industries but those in ICEV, agro-chemical, chemical, rail, media, banking, & other industries who lied about climate catastrophe, or funded those lies, & all those who lied or funded lies trying to take over the US & other governments in the SlowCoup*—need to agree to a massive, comprehensive, emergency climate mobilization—the Green New Deal. Besides efficiency, wiser lives, clean safe fast cheap reliable renewable energy, public transit including a state of the art high speed rail network, it needs to include universal health care, affordable education, & other social & equality measures, & a revolutionizing of the tax code to begin the move toward radical economic political equality.

    *through other crimes like the constant disinformation campaigns waged by industry & the right—voter suppression, gerrymandering, racial & gender lies & human rights violations (children in cages makes clear their political & psychological connection to the Nazis), unconstitutional subordination of state to religion, COVID denial…

  2. jimbills Says:

    Musk had been making some news about ESG just before the Twitter deal:

    Ignoring his whining about ‘phony social justice warriors’, he does have a point about how ESG totals are calculated – there is something screwy there when Exxon is given a better ESG score than Tesla.

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