Commissioner Jones publicly releases latest insurance company oil, gas, coal and utility investments

News: 2018 Press Release

SACRAMENTO, Calif. — In order to have better insight into climate risks faced by insurer investments, California Insurance Commissioner Dave Jones publicly released today the most recent data on individual insurance company’s oil, gas, coal and utility investments. The Commissioner added these new fossil fuel disclosures to the Climate Risk Carbon Initiative database on the California Department of Insurance’s website, which provides transparency and insights with regard to how much fossil fuel exposure each respective insurance company faces. The database reveals fossil fuel investments by insurer, including thermal coal, oil and gas, and utility investments. The online database now includes three years of insurer fossil fuel investments from 2015 to 2017 searchable by insurer and year, making it the most comprehensive public database of insurer investments in fossil fuels. In addition, the database includes individual insurers’ responses to Commissioner Jones’ request that insurers divest from thermal coal because of the risk thermal coal faces of becoming a stranded asset.

“Climate change poses potential financial risks to insurers’ investments, particularly those investments in fossil fuels, as governments, businesses, consumers and markets transition away from fossil fuels in order to reduce greenhouse gas emissions causing climate change,” said Insurance Commissioner Dave Jones. “In 2016 I began requiring insurers to disclose their fossil fuel investments and I asked insurers to divest from thermal coal because of the risk thermal coal could become a stranded asset on the books of insurance companies as consumers, businesses, markets and governments transition away from thermal coal as a source of energy. With this most recent disclosure of insurer fossil fuel investments we have better insight into the climate change related transition risks faced by insurers and their investments in fossil fuels.” 

The database tracks fossil fuels investments based on the following criteria: oil and gas companies that receive 50 percent or more of revenue from mining, refining and exploration of oil and gas, thermal coal companies that generation 30 percent or more of their revenue from the mining of coal, utility companies that generate 30 percent or more of their power from thermal coal, and utility companies that generate 50 percent or more of their power from oil, gas, and coal.

Commissioner Jones launched the Climate Risk Carbon Initiative in 2016 to address the climate change related “transition risk” faced by insurer investments in fossil fuels. There is a potential financial risk to the value of fossil fuel investments as governments, consumers, businesses and markets transition away from fossil fuels in order to reduce climate change. There is a risk that fossil fuel investments could become “stranded assets” on the books of investors, including insurance companies. A stranded asset is any asset that has suffered an unanticipated or premature write down, devaluation or conversion to liability.

As a financial regulator, one of Insurance Commissioner Jones’ responsibilities is to make sure insurance companies recognize financial risks to their investment portfolios and invest in ways that maintain the value of investments so they are available to pay future claims. This newly released information and the Climate Risk Carbon Initiative online database will allow the department to continue to monitor the climate risk faced by insurer investments in fossil fuels and the exposure of insurance company portfolios to fossil fuels.  

“During COP21, world governments committed to contain global warming under 2°C. This has led to a tremendous mobilization across industries,” said Jad Ariss, AXA Group Head of Public Affairs & Corporate Responsibility. “As one of the largest insurance groups worldwide, AXA was the first major institutional investor to initiate divestment from coal in 2015. Three years later, less than 10 percent of insurers have restricted coal investment. We hope our decisions will create further momentum in the insurance industry. Rather than supporting the past, we prefer to support a low carbon future.”

Commissioner Jones is the first financial regulator in the United States to ask for divestment from thermal coal due to the climate-related financial risk that thermal coal could become a stranded asset, the first to require the disclosure of oil, gas, coal and utility investments of insurance companies, and the first to perform climate-risk scenario analysis on the portfolios of insurance companies. Climate change experts Butch Bacani of UN Environment’s Principles for Sustainable Insurance Initiative (PSI), Cynthia McHale of Ceres, and Alex Bernhardt of Mercer, who also contributed data to the updated database, have provided statements supporting Commissioner Jones’ efforts.

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Media Notes

• Climate Risk Carbon Initiative database
• As an international leader on climate risk, and as the regulator of the largest insurance market in the nation, Commissioner Jones has led a multistate effort since 2011 to require insurers to respond to the Climate Risk Disclosure Survey adopted by the National Association of Insurance Commissioners (NAIC) in 2009.
• In early 2016, Jones launched the Climate Risk Carbon Initiative because of the potential for investments in coal, oil, gas, and utilities relying substantially on burning carbon, to become "stranded assets" on the books of insurers with declining value as governments, consumers, businesses and markets, in an effort to address climate change and in response to market forces, may slowly or dramatically reduce the demand for carbon-based fuels causing the value of these assets to drop.
• In May, Commissioner Jones became the first financial regulator in the U.S. to conduct a climate-related financial risk scenario analysis of insurance companies' investment portfolios. The Department engaged 2° Investing Initiative, an established climate risk modeler, to conduct this climate risk scenario analysis for the 600 insurers in California's insurance market with over $100 million in nationwide annual premiums—the most comprehensive climate-related financial risk scenario analysis ever conducted for the insurance sector. The sector wide scenario analysis indicted that insurers’ investment in utility investments powered by thermal coal faces a fair amount of climate related transition risk, consistent with Jones' Climate Risk Carbon Initiative determination that thermal coal as an investment faces climate-related financial risks of becoming a stranded asset, despite any short-term fluctuations in market price and federal policy signals.