Lloyd’s has been accused of “abandoning its ESG policy” over its failure to mandate the exclusion of new coal, tar sands and arctic energy projects in its recently issued guidance to the market.

Insure our future

The Insure our Future coalition of non-governmental organisations said tonight (3 November) it has revised Lloyd’s score downward after claiming the Corporation had softened its tone around the future underwriting of certain fossil fuels.

And other leadership initiatives embarked on by the Corporation – including its role as chair of the Prince of Wales’ Sustainable Markets Initiative (SMI) Insurance Task Force – have been dismissed as a “greenwashing exercise” by the Coalition.

The Insure our Future scorecard provides insurers with a score of between 0 and 10 in three categories – Fossil Fuel Insurance, Fossil Fuel Investment and Other Climate Leadership.

The Coalition said today it had intended to score Lloyd’s 1.8 in underwriting – in line with companies such as Aviva and Munich Re – and 1.3 in investments but revised its view negatively following the publication of fresh guidance to managing agents last month around ESG commitments.

In its inaugural ESG report issued last December, Lloyd’s said “managing agents will be asked to no longer provide new insurance coverages or investments for coal, oil sands and Arctic energy projects as of 1 January 2022” with a date of 2030 for existing coverages.

But in its latest guidance, Lloyd’s said while it remains of the view that these actions represent “a sensible and pragmatic ambition”, it added that it would not be mandating their exclusion and “it will be up to each managing agent to determine their appetite”.

In response, Insure our Future revised its scores for Lloyd’s down to 0.9 and 0.4 for underwriting and investment respectively.

The move has sent Lloyd’s climate ranking down from 1.8 to 0.9 on underwriting and from 1.3 to 0.4 on investment.

The downgrade places Lloyd’s at 16th overall in both categories. Had Lloyd’s not been downgraded, it would have sat in 12th place – above the likes of HDI Global and Tokio Marine.

Despite the downgrade, Lloyd’s underwriting and investment scores in 2021 mark an improvement on its 2020 scores where it received a 0 and 0.23 respectively.

In the Other Climate Leadership category, Lloyd’s has been given a score of 0 for 2021, compared with a score of -1.33 last year.

In addition to Lloyd’s CEO John Neal’s leadership role as chair of the Prince of Wales’ Sustainable Markets Initiative (SMI) Insurance Task Force, the market last month recently joined the UN-convened Net-Zero Insurance Alliance (NZIA).

Other NZIA signatories such as Aviva, Allianz and Axa have scored highest in the leadership category. All three firms were among the eight founding members of the NZIA and have committed to align their underwriting and investments with a 1.5°C pathway.

However, Lindsay Keenan, European coordinator for Insure Our Future and an at times outspoken critic of the industry, said the group viewed Lloyd’s recent membership of the NZIA and the SMI as a “greenwashing exercise”.

Scoring grid

In a statement to The Insurer, Keenan said: “The SMI initiative again makes clear that it will not address the core basic issues of insurance and investments. So it is viewed as not only being nothing new but indeed it appears much more like a greenwashing exercise.

Kennan said the SMI is similar to and appears to flow from The ClimateWise Initiative – a collaborative endeavour launched in 2007 by insurers to drive action on climate change.

Kennan added that Lloyd’s – alongside other signatories to the SMI – have been members of the ClimateWise Initiative for more than a decade “without making any substantial progress and without ever addressing their underwriting”.

Lloyd’s membership of the NZIA commits the Corporation to transition its “operational and attributable” greenhouse gas emissions to net zero by 2050, as well as assets held by the Central Fund.

As part of the commitment Lloyd’s said it will also “advocate and support all market participants to introduce and implement their own net zero plans in order to reach a net zero underwriting position for the market by 2050 at the latest”.

The Insurer Comment:

Timed – naturally – to embarrass the Corporation’s management ahead of Finance day at Cop-26 later today, one could also argue the Coalition shows a limited understanding of Lloyd’s. It is not a company and its CEO cannot pull a lever and expect the ship to move in a different direction. It has to nudge behaviour as much as mandate.

However, when you take a leadership position you also become a target if you are seen to disappoint. Indeed, we saw this only last month when activists took a full page advertisement out in the FT in an apparent bid to shame Axa and its CEO Thomas Burberl. The reality is the industry is going to have to get used to such criticism and one way of tackling it is to ensure it is involved in the global debate about carbon transition - and the role of financial services in supporting the repositioning of the global economy.