AXA is giving into activist pressure and backing away from insuring oil and gas installations. AXA began to phase out cover for coal projects back in 2015 and it continues to bang the green drum on all insurance cover and investment. As COP26 is about to dominate the mainstream media Op-Ed and Comment pieces next week, this is perfect timing for what can only be seen as an inherently `good’ decision, although many climate change protestors will not be satisfied.
Here’s the statement;
In the run-up to COP26, AXA extends its commitment to fight climate change and protect biodiversity. AXA announces several new milestones in its approach to the energy sector by strengthening its existing Oil and Gas exclusions, with a specific focus on unconventional activities and new greenfield explorations.
The climate emergency requires us to step up our actions and support the transition towards a low-carbon economy. The unprecedented and complex transformation needed can only happen by enabling companies from the energy sector to implement ambitious transition plans. Going forward, AXA is determined to focus its support only on actors with the most far-reaching and credible transition strategies – says Thomas Buberl, CEO of AXA.
AXA’s new commitments are the following:
Firstly, AXA will stop investing in and underwriting new upstream oil greenfield exploration projects unless they are carried out by companies with the most far-reaching and credible transition plans.
- AXA excludes all new direct investments in listed equities and corporate bonds in developed markets in Oil and Gas companies operating in upstream and/or oilfield services and/or downstream subsectors, as well as most midstream players. AXA selects integrated Oil and Gas companies for investments based on a restrictive selection process. Less than 5% of the approximately 650 companies identified in the Global Oil and Gas Exit List by NGO Urgewald meet AXA’s criteria.
- From 2023, AXA will apply the same selection process, and take into account the Science-Based Targets initiative (SBTi) framework as it becomes available, for its underwriting business of new insurance coverage on new upstream oil greenfield exploration projects.
Secondly, AXA will significantly reduce its investment and insurance exposure to unconventional exploration and production from its business from 2022, as follows:
- Arctic: AXA extends the scope of its Artic investment and underwriting restrictions beyond the Arctic circle and the 70°N zone in alignment with the Arctic Monitoring and Assessment Programme (AMAP). Only businesses with Norwegian operations in the AMAP region will be maintained, given their high environmental standards and lower operational carbon footprint. AXA will strengthen the thresholds applicable to both its investments and insurance activities in this particularly fragile region, excluding new investments and underwriting coverage for Oil and Gas extraction activities carried out in the AMAP region by companies deriving more than 10% of their production from the AMAP region or producing more than 5% of the worldwide volume of AMAP-based Oil & Gas. For underwriting, exemptions may be granted if the projects are carried out by Oil and Gas companies with the most far-reaching and credible transition plans.
- Oil sands: on top of the existing restrictions in place, AXA will adopt a more stringent policy by ceasing direct investments in companies producing more than 5% of the worldwide volume of oil sands. For underwriting, current exclusions will be extended to all lines of business.
- Fracking / shale Oil and Gas: AXA will no longer directly invest in companies, nor provide any insurance coverage to activities of companies, deriving more than 30% of their production from fracking / shale Oil and Gas.
Lastly, AXA continues to intensify its investments in green and low-carbon energies.
- The Group’s green investment target increases to Euro 26 billion by 2023, compared to Euro 24 billion announced at the end of 2020.
The decision on shale oil and fracking is interesting, as the UK has large stocks and may yet need to extract them simply to keep the lights on and everyone’s smartphone charged up – yes, even the activists sitting in the M25 will be annoyed when there’s no power.
The answer at that point may well be a government underwritten exploration and extraction scheme. This could be the answer for North Sea oil and UK based oil refineries and distribution too. Fact is, we will need fossil fuels for many years yet and relying on the French for nuclear power, or Putin’s Russia for gas, is simply unsustainable politically. There are too many petty squabbles in the goldfish bowl of world politics which tend to interrupt supplies. As Covid has proved, when the UK governments want to, they can simply create money to throw at a problem, so a kind of Energy Re scheme is the logical solution.
One final point, all this virtue signalling does is open the door for Ping An and other Chinese insurers who will be only too happy to underwrite carbon based industry, exploration, mining, steel and cement making – all that high C02 stuff.