A consortium of 20 major U.S. investors, including state and local pension funds, have called on publicly traded insurers to more thoroughly assess and disclose their risks from global climate change.
The investors, including the Service Employees International Union, the California Public Employees Retirement System, the United Methodist Church and several state Treasurers, manage over $800 billion in combined invested assets.
In a letter to the chief executive officers of the top 30 publicly held insurance companies, the investors asked each company to undertake a "comprehensive analysis" of the implications of global climate change on their business and report the findings to their shareholders. The letter calls for the reports to be completed and shared with investors by August of 2006.
"A growing number of companies in the energy sectors are evaluating the impact of climate change on their companies and reporting back to their shareholders," the investors noted.
"While more insurance companies are acknowledging the seriousness of climate change issues, few if any companies have examined the broad financial risks and opportunities from this issue and potential impacts on shareholder value," the investors wrote.
Among the companies receiving the letter were American International Group, Hartford Financial Services Group, Allstate, Chubb, Berkshire Hathaway/General Re, XL Capital and Aon Corp.
In a conference call with reporters, North Carolina Treasurer Richard Moore argued that the issue of climate change is too important to be ignored given the potential financial implications. "We're speaking out on this issue as investors, not as regulators," he said.
Investors have sought for years for more transparency and information from companies about their risks, and given the increasing warnings over climate change, and the increasing number of major storms, investors should also be made aware of how much consideration a company has given the issue.
"It's very hard to see how you can ignore the obvious signs and not ask the simple question: 'Are you incorporating these signs into your assessment of risk?'" he added.
In their letter the investors noted that when New York City Comptroller William Thompson recently surveyed 13 companies in which New York pension funds are invested, with questions concerning climate change issues, his inquiries were largely ignored.
Only eight of those companies surveyed provided a response, and none provided any assurance that the issue was being assessed or considered, the investors noted.
Ken Sylvester, assistant comptroller for pension policy in New York City, said during the conference call that the responses to the survey "indicated that companies have not taken this issue very seriously" and had not put much effort into examining their potential risks.
Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, said the investors were also hoping to prod not only insurance companies into action, but also their clients.
"Insurance companies have been a lever for decades in moving public policy into action," she said, noting as an example that if insurers started altering their rates based on a companies' willingness to control carbon emissions, which have been linked to climate change, then those companies would make the necessary changes to save money.
Jack Ehnes, chief executive officer of the California State Teachers' Retirement System, also said that the investors' goals stretched beyond the insurance companies.
"More accurate and tighter underwriting will have a broader effect on the economy," he said, "and that's the ripple effect we're looking for."
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