Insurance firms failing to disclose climate risks, says ClientEarth

ClientEarth has reported a number of UK insurance firms to the Financial Conduct Authority (FCA).

The group of environmental lawyers state that three firms, Admiral, Lancashire Holdings Limited and Phoenix Group Holdings, failed to disclosure their level of exposure to climate risks in their annual reports.

Stephanie Morton, an insurance lawyer for ClientEarth, commented: “Given the myriad of climate change-related risks these companies are exposed to, we were surprised to find that they were not communicating this to investors.

“We think the law is quite clear on this and by omitting financially material climate risks from their annual reports, these companies are not giving the full picture. Without this information, how can investors make a fully-formed investment decision?”

Insurance companies are exposed to a multitude of risks as a result of climate change, not least the rise in claims from extreme weather events. They are also impacted by changes in demand away from carbon intensive sectors and government policy to tackle the rise in global temperatures.

As a result, it is vital that investors are fully aware of how a company’s current holdings are potentially impacted by these changes. However, as a recent report highlighted, the global insurance sector has been slow to adapt to the existential threats posed by climate change.

Morton added: “The FCA has moved swiftly this year in understanding the risks that climate change presents to the economy. This is an opportunity for the FCA to send a strong market signal that climate disclosures are essential for enabling investors to assess climate-related financial risks, and we look forward to a speedy and robust response.”

Under a new ruling from the UK Government, pension funds will soon be required to provide an assessment of how their decisions are based on sustainability concerns. In effect, this gives the green light to the funds to dump their assets in fossil fuels.