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How are environmentalists using insurance as a tool to combat climate change?

How are environmentalists using insurance as a tool to combat climate change?

Coal is the biggest source of greenhouse gases, as well as a big contributor to air and water pollution. If we are to reverse the global effects of climate change, we have to eliminate the use of coal as a prominent energy producer.

For years, climate activist groups have been trying to do just that. And an unconventional weapon in their arsenal has been insurance.

You see, without insurance, coal projects are impractical. Insurance manages risk and primarily decides which project gets built and which gets scrapped. And so, climate activists have been working on a simple premise- fewer coal mine insurers = fewer coal mines.

  • Insure Our Future, a campaign geared towards fighting climate change through insurance, has been focusing on getting insurers to remove the coal industry from their portfolio.
  • A 2021 report by Societe Generale SA about European insurers correlated a strong stance against the coal industry with higher stock valuation. This has given their cause a growing impetus!
  • Important European re-insurers like MunichRe, Allianz, SwissRe, have strengthened their Environment, Social, and Governance (ESG) policies in accordance with the Paris Climate Agreement.

But what does this mean for India?

India’s thermal plants produce around 75% of our total power. However, they have been facing multiple roadblocks for years due to lack of re-insurers from global markets.

The thing is, insuring coal mines and plants involves huge funds and capacities that Indian insurers do not have. For decades, Indian coal companies have been relying on global underwriters, something that has caused them some grief in light of foreign re-insurers tightening their stance on the coal industry.

If more global insurers step away from coal, India will have to do the same soon.

Refraining from insuring the coal industry is not the only way environmentalists are preserving our planet. Check out the world's first Ecosystem Insurance!