Allianz’s new exclusion policy on coal and oil sands has signalled an important step forward, however, the magnitude of the challenges laying ahead to keep global warming at bay may require bigger efforts faster.
Lucie Pinson, executive director of the NGO Reclaim Finance, told IPE that Allianz was one of the first global investors and insurers to take action on coal. But, she added, “what seems bold is actually baby steps with regard to the scale of the changes that need to happen in the coming years.”
A spokesperson for Allianz said that the rationale of the new policies is to accelerate the phase out from coal and reach a net zero position globally.
Allianz has set out the goals to exit coal in the OECD area by 2030 and globally, including Asia, by 2040, taking into account the dependence on coal of that region, the spokesperson added.
“While the end goal is good, this approach is not the best one to push companies to immediately plan and engage the closure of their coal assets, Pinson said.
The insurer has now tightened the grip on financing thermal coal, one of the major contributor to greenhouse gas emissions and global warming.
Under the new policy, it will stop financing or providing property and casualty insurance to companies, including utilities, mining companies and coal service providers, generating over 25% of revenues or electricity from thermal coal from January 2023.
It will also stop financing companies or their subsidiaries involved in planning new coal mines or plants, including utilities, mining companies and coal service providers, companies that have over 5 GW of thermal coal power plant capacity installed or that mine more than 10 million tonnes of thermal coal per year.
The exclusion is extended from single site insurance and investments of coal-fired power plants and mines in operation to infrastructures such as coal ports from July of this year.
“Allianz will stop insuring most companies planning new coal projects in 2023, which is far too late,” Pinson said.
Moreover, “the restricted definition adopted by Allianz regarding coal mine developers may allow some companies to slip through the net,” she added.
Allianz can open exceptions to companies with a “credible and public strategy to transition away from coal” at speed in line with limiting global warming to 1.5°C. It will engage and provide capital to companies to transition away from coal.
The challenges ahead are huge for the coal power sector, with most of the 6,600 coal power units to close by 2030, Pinson said, adding: “Allianz should have aligned with best practices and call companies to adopt an asset-based coal phase out plan by the end of 2021.”
Going beyond coal
The new policy applies also to companies active in the oil sands business, which are excluded from the investment, property and casualty insurance.
“Keeping global warming at 1.5°C maximum requires stopping expanding the fossil fuel frontier and engaging in a managed decline of the oil and gas industry, but the insurer has yet to start phasing out its coverage and investment to the oil and gas sector, beyond tar sands,” Pinson said.
According to its latest sustainability report, Allianz supports the commitment of the Oil and Gas Climate Initiative (OGCI) to limit the upstream intensity for Scope 1 and Scope 2 emissions of oil and gas companies to less than 20kg CO2e/barrel, aligning exposure to the industry on average listed equities and corporate bonds to that intensity level.
It aims to set net zero 2050 targets for at least 50% of the assets under management in the oil and gas industry by 2025, it added.
The insurer has divested in the last years over €6.3m from coal-based businesses, while investing around €6.8bn in wind and solar parks. Allianz Global Investors and PIMCO – whcih is set to merge with Allianz Real Estate – invested more than €231bn in sustainable projects and companies.