Lloyds of London moves to insure that it puts the environment first
One of London’s premier markets has made a bold decision about certain types of fossil fuels. Lloyds of London the worlds largest insurance market has voted to end new insurance cover for coal oil sands and all Arctic energy projects by January 2022 and to pull out of these business areas altogether by 2030. The […]
One of London’s premier markets has made a bold decision about certain types of fossil fuels. Lloyds of London the worlds largest insurance market has voted to end new insurance cover for coal oil sands and all Arctic energy projects by January 2022 and to pull out of these business areas altogether by 2030.
The decision came as the insurance market published its first ESG or Environmental, Social and Governance report. Lloyds said that the 90 insurance syndicates that make up the London market will phase out outstanding policies for fossil fuel projects over the next decade.
Fossil fuel insurance accounts for slightly less than 5% of the £35 billion in annual premiums that Lloyds syndicates currently bill.
Commenting on the commitment Lloyd’s chairman, Bruce Carnegie-Brown said that: “We want to align ourselves with the UN sustainability development goals and the principles in the Paris agreement,” and that “A lot of syndicates are already doing some of the things we are setting out here but we are trying to create a more comprehensive framework for the whole market.”
Lloyds will also move away from doing business in coal-fired power stations, the extraction of oil from so-called tar sands. Which are primarily found in Canada’s Alberta province and which have previously been described as the most destructive oil extraction operation in the world.
The sands are an oil-rich resource containing what’s estimated to be the worlds third-largest crude oil reserves. However, extracting oil from the sediments is an energy-intensive process and therefore unsuited to a low carbon, low emissions future.
Exploring for oil and gas in the Arctic has long been controversial and has been at the top of environmental campaigners hit list for many years. The decision made by Lloyds Insurance syndicates may not kill energy exploration in the Arctic but it will make it much harder and expensive to pursue and may dramatically limit the involvement of Western companies in the process.
Justifying the 2030 target having been asked why the insurance market could not act more swiftly Mr Carnegie-Brown said that: “Oil is too fundamental an energy supply source for the world today and it would be impossible to get out of that without creating real dislocation to our customers. It’s an issue of calibration over time.”
The Lloyds of London ESG report also made commitments about levels of diversity and inclusion by setting targets for leadership roles for women and promising similar action for ethnic minorities in 2021.
The decision to discontinue doing business in certain fossil fuels markets by Lloyds insurers hasn’t met with universal acclaim environmental groups believe that it doesn’t go far enough and should be enacted quicker.
However, to this observer, it looks like one of the most clear-cut examples of changing attitudes towards climate-related issues in the world’s financial markets. It is one that will have visible and tangible effects on businesses which operate in these areas. Who, are likely to find that insuring their enterprises becomes more expensive and then completely unavailable.