Hello from London, where climate tech founders are a bit dejected. That’s the impression Simon and I got when we asked a dozen of them last week what it was like trying to scale a business in the UK.
Some complained about torturously slow approval processes for government grants, and the lack of interest by venture capital in supporting companies below a certain scale. Others pointed out that the UK’s laxer hiring and firing laws and London’s talent pool still gave it an edge.
But, wistful about the capital unlocked by the Inflation Reduction Act on the other side of the pond, some worried that European investors have become less keen on climate-related “hardware” companies, that build high-tech carbon storage or recycling facilities, for example. Software start-ups with tried-and-tested business models focused on data collection and accounting are easier to pitch.
It is not all gloomy over here. The UK has awarded its first round of carbon dioxide storage licences to stash the gas in depleted oil and gasfields off the British coast, the FT’s clean energy correspondent Rachel Millard wrote in her busy first week. And John Thornhill argued Europe could boost its start-ups by “Frankensteining” Germany’s inventiveness with the UK’s tax credit system and France’s financing institutions.
Today, we bring you a story on race wars at insurers’ AGMs. Join us tomorrow for the first day of our Moral Money Europe summit, where Simon will kick things off by interviewing the EU’s financial services chief Mairead McGuinness. (Kenza Bryan)
Insurers hit with range of shareholder proposals
Insurers’ performance on ESG issues is in the spotlight this year — and it’s not just the climate that investors are worried about.
Shareholders are asking US insurance groups Hartford, Travelers, Berkshire Hathaway and Chubb to act faster to evaluate human rights and race issues, and to stop underwriting new oil and gas projects, at annual meetings taking place this month.
Shareholders at Travelers will vote on Wednesday on whether it should conduct a full racial equity audit of its staff and its underwriting practices, after a similar proposal received 47 per cent of votes cast last year.
Trillium Asset Management, which filed both proposals, said the insurer had a smaller proportion of people of colour on its boards than any of the other top 10 insurers in the US. Black people represent just 3 per cent of its senior leadership compared with 18 per cent of administrative support staff, according to 2021 data.
It also highlighted alleged discrimination in insurance provision. A lawsuit settled by Travelers in 2018 alleged that it had denied insurance to landlords renting to households receiving income support, which are disproportionately made up of black women.
In a strongly worded response, the insurance company’s board of directors argued conducting an audit would violate insurance laws in multiple US states, which “prohibit the consideration of race in underwriting and pricing decisions”. It also said the audit would use up too much company time given Travelers already had a “thoughtful and comprehensive” approach to diversity and inclusion.
Marine Esperandieu, a director at the consultancy SquareWell Partners, said activist shareholders have not submitted the same ESG-related proposals at insurers in Europe. One reason for this is that race is a “very US-centric topic . . . amplified by high-profile movements like Black Lives Matter”, she said.
Another factor may be that some European insurers have voluntarily adopted Say on Climate proposals, and are taking the issue relatively seriously. As one group head of sustainability at an EU-based insurer told me with some anxiety last week, “nobody is with any degree of confidence looking at what the real impacts will be . . . climate science did not predict the number of extreme events that are happening today”.
But this is only the second year that insurance companies in the US have had to reckon with climate-themed resolutions, in an “unprecedented” recognition that insurers were “society’s risk managers”, said Mary Sweeters, a senior strategist at the campaigning group Insure Our Future. In the US S&P 500, three out of the 10 companies targeted by climate-related shareholder proposals for the 2023 AGM season have been insurers.
Out of 15 insurers globally who have adopted oil and gas exclusion policies, only one, Chubb, was based in the US, she added.
This type of activism is still relatively untested ground. Shareholders who file climate proposals must be prepared to educate others about the role played by the insurance industry, Andrea Ranger, shareholder advocate at Green Century Capital Management, told Moral Money.
The Boston-based asset manager’s proposal that insurers stop underwriting new oil and gas projects was supported by less than a fifth of the shares voted at Hartford, Travelers and Chubb last year (after all three insurers fought unsuccessfully to keep them off the ballot).
Since then, the US backlash against ESG investing has turned its fire on insurance companies, after Texas Republican lawmaker Bryan Hughes reportedly wrote to large insurers with concerns about shareholder proposals targeting fossil fuel business.
Green Century watered down its demands this year, after institutional shareholders and proxy advisers told it that these should be written in a more flexible way. It is calling for a phase out of new oil and gas projects, rather than an immediate end to underwriting.
Chubb made headlines in March when it said would only underwrite oil and gas projects for clients that could prove they had plans to reduce methane emissions. A proposal by shareholder advocacy non-profit As You Sow for Chubb to set a target to align underwriting, insurance and investment activities with the goal of limiting global warming to 1.5C above pre-industrial levels was backed by 29 per cent of votes cast at its AGM last week.
Travelers declined to comment beyond the responses in its proxy statements. Berkshire Hathaway, Chubb and Hartford did not respond to a request for comment. (Kenza Bryan)
Don’t miss Henry Mance’s interview with the economist Daniel Chandler, who argues a fairer distribution of power within the workplace could benefit both shareholders and the democracies they live in.
Moral Money Summit Europe
Join us in London, or online, for the third annual Moral Money Summit Europe on May 23-24. Leading investors, corporates and policymakers will come together to discuss what needs to happen next to unlock a more sustainable, equitable and inclusive economy.