OCTOBER 17, 2023
Looking back, it’s shocking that it took years of relentless advocacy to get major insurers to stop underwriting fossil fuel projects.
Well before the Paris Agreement was reached in 2015, the Bank of England had warned that “the vast majority” of fossil fuel reserves were “unburnable” if global warming was to be kept below 2°C, and that insurers risked taking “a huge hit” if they kept investing in fossil fuels.
As part of ClimateWise, a global network with the motto “insuring a sustainable future,” many top insurers had espoused principles such as “incorporate climate-related issues into our strategies and investments,” and called for urgent action to address escalating climate risks.
Yet when fossil fuel projects needed insurance—to cover liabilities during construction and operations, and protect their investors—they had no trouble getting it. Indeed, the insurance industry, with tens of trillions of dollars in assets under management, was itself an investor.
So when John Hepburn, founder of The Sunrise Project in Australia, was selected for the Climate Breakthrough Award program in 2016, he decided to use his grant to launch a global campaign targeting insurers. His team’s goal was to fundamentally shift the financial outlook for fossil fuel projects. A good first step was to make them uninsurable.
“You can’t build a coal plant, a gas plant, an oil pipeline—you can’t build anything without insurance,” John said. “They’re the ultimate risk managers in the global global economy, so they potentially have a hard lever to stop the expansion of the fossil fuel industry.”
Sunrise commissioned a study of European insurers to understand where they stood on fossil fuels and identify first movers who could influence others, such as AXA and Allianz. In early 2017, Sunrise launched Unfriend Coal, focused on getting insurers to stop underwriting coal projects in particular. That November, the campaign published an insurer scorecard showing companies were starting to divest from coal, and some were refusing to underwrite it.
Every year, more insurers came on board, and the campaign pushed them to go farther: to divest more broadly and also stop underwriting oil and gas products. The 2022 Scorecard showed 41 companies had restrictions on coal, 22 so far on tar sands, and 13 on oil and gas—including Munich Re, Swiss Re and Hannover, the top three reinsurers in the world.
Unfriend Coal is now a global campaign called Insure Our Future, with two dozen partner organizations. And Sunrise has expanded its advocacy into a global finance program also targeting banks, bond markets, private equity, investors and financial regulation.
The battle is far from won, but coal projects are now virtually uninsurable in much of the world, Hepburn says, and insurance is generally more expensive for fossil fuel projects. In early 2021, because of the work John launched, Larry Fink, CEO of BlackRock, characterized climate risk as “investment risk” and committed to transition the company, which manages $7.81 trillion in assets, away from fossil fuels.
Describing the campaign on Australia’s ChangeMakers podcast, Hepburn says the campaign feels like “a small snowball” that Sunrise started rolling and “got bigger and bigger.”
“It is moving faster and more powerful than we could possibly have imagined… I feel really proud of the work that we’ve done… And now you’ve got insurance companies that are starting to come out and actually do real things to push for action on climate change. You’ve got banks and other insurance companies pushing other insurance companies, and it started to create a self-fulfilling dynamic.”
Recent Updates
- “We have shifted the majority of the global insurance industry to stop underwriting new coal projects and have materially increased the cost of insurance for fossil fuel projects globally,” John said.
- Although Australia continues to be a top coal exporter, the insurance campaign has also scored victories at home. In 2021, a contractor for Adani reported to Parliament that no insurer would provide coverage for its work for the mining company.
- Sunrise has also grown exponentially, with a staff of about 150 across 12 countries and a grant program awarding about $60 million per year to over 200 organizations around the world.
- “The funding from Climate Breakthrough has also enabled Sunrise to build a global finance program that is now much wider,” John said, “including banks, bond markets, private equity, investors, and financial regulation.”
