Last year, as in the preceding three years, we have engaged with QBE to take action to address their most materials climate impacts, including by winding down their oil and gas exposure. Once again, the company has failed to take adequate action to mitigate the impacts and risks of this business, so we are co-filing with Market Forces again, asking that the company set out their plans to reduce their investment and underwriting exposure to the oil and gas industry, as the need to act on climate change becomes increasingly urgent.
As investors, we want to see the company take action to align their business with the objectives of the Paris agreement, as well as reduce their exposure to risk, by setting targets and criteria to restrict and reduce their fossil fuel investment and underwriting. This is important because of the crucial enabling role of QBE’s underwriting and its particular exposure as an insurer in an increasingly unpredictable and destructive climate.
As it was last year, QBE’s policy is that when making underwriting decisions, it will assess alignment of oil and gas companies with the Paris Agreement from 2030, and from 2040 for companies with less than 60% revenue from oil and gas extraction. No date has been set for companies with less than 30% revenue from oil and gas extraction, such as BHP (which has major oil and gas operations around the world). In addition, the restrictions do not apply to treaty reinsurance of oil and gas sector exposures.
This delay of up to 20 years (and more) and these limitations on scope are inconsistent with the support QBE has expressed for the objectives of the Paris Climate Agreement. QBE’s Notice of Meeting gives no insight into this inconsistency.
The company state: “An exclusionary approach to all fossil fuel–related activity on a categorical basis does not represent an orderly path to a net-zero economy”. However neither does an unconstrained approach. QBE has failed to set targets to reduce their oil and gas business in line with an orderly transition toward net zero, consistent with the Paris Agreement. Businesses like QBE could be facilitating the orderly transition from fossil fuels by announcing their plans for restricting and winding down exposure, and sending a clear signal to their oil and gas customers of the need to avoid new fossil fuel projects which frustrate the objectives of the Paris Agreement and create unacceptable financial risk for those businesses.
A science based transition away from the burning of fossil fuels is required in order to limit the most severe impacts of climate change. To achieve that without impeding the reliability and affordability of energy, which QBE express as their objective, companies like QBE need to disclose to customers and investors their plans for transition, by setting targets over the short, medium and long term to restrict and reduce their investment and underwriting exposure to oil and gas.
QBE has taken some significant steps towards aligning its operations, investment and underwriting with the Paris Agreement. However, postponement of assessment and action in the crucial oil and gas sector to 2030 and beyond is an unignorable gap in the area where QBE can have the most material climate impact: When considering whether to underwrite new long term high emissions projects, responsible insurers should be asking now whether those projects are consistent with the Paris objectives.
Insurance companies and industry groups are drawing attention to the growing risks to their business of continuing global warming. Insurers are calling for government policy and funding to support climate mitigation and adaptation which will safeguard the accessibility and sustainability of insurance. Support for the resolution signals to QBE that the credibility of these calls relies on insurers playing a proactive role in limiting global warming in the most material areas of their own underwriting and investment activities.