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AIG names sustainability leader, outlines climate exposures

Posted On: Jul. 24, 2019 10:24 AM CST

Jennifer Waldner

American International Group Inc. has created the position of chief sustainability officer and issued its first report on climate risks and opportunities under recommendations issued two years ago by the Task Force on Climate-related Financial Disclosures.

Jennifer Waldner has been appointed to the new position, which will be responsible for implementing AIG’s sustainability strategy and developing a corresponding reporting structure, effective immediately, according to a statement by the insurer on Wednesday. Ms. Waldner, who most recently served in the position of head of citizenship for AIG Life and Retirement, will report to Thomas Leonardi, AIG’s executive vice president and vice chair of AIG Life Holdings Inc., according to the statement.

AIG also issued its first report under the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, which finalized in June 2017 a set of final recommendations to guide companies in assessing the material risks climate change poses to their operations and develop plans to mitigate these risks. The insurance industry has made progress in disclosing the impacts climate change will have on their operations but still has plenty of room for improvement, including in describing how they plan to ensure their organizations are resilient to climate risks, experts say.

The task force’s recommendations cover four core elements: governance, strategy, risk management, and metrics and targets. The governance section of AIG’s report notes that the board of directors and executive leadership team are “responsible for addressing the risks and opportunities posed by climate change while providing the robust governance and risk management oversight needed to ensure the company’s ongoing financial strength.” The board has delegated overall responsibility for climate-related issues facing the company to the Nominating and Corporate Governance Committee, while the insurer’s Risk and Capital Committee may be informed of climate-related risks in its role and responsibility to oversee and review AIG’s material risks as well as its approach to managing those risks. Both committees meet at least four times per year or more frequently as deemed necessary, according to the report.

The strategy section outlines the insurer’s short- to medium-term risks such as physical risks related to natural catastrophes. “Following an extensive review, we have substantially reduced our gross and net limits, particularly in Property and Casualty insurance, which has subsequently lowered our risk of exposure to natural disasters,” AIG stated in the report.

The report also outlines longer-term risks such as policy and regulatory risk, legal and litigation risk, technology risk and reputational risk.

“Litigation seeking to compel companies to remedy their perceived contribution to climate change may, if successful, also lead to an increase in claims,” the insurer stated. “Based on our monitoring, while the overall volume of litigation activity has increased, past litigation seems to have largely been unsuccessful on numerous grounds including difficulties in determining and attributing fault and liability to a particular company, and the judiciary’s deference to the political branches of government on questions relating to climate change.”

AIG also discussed climate-related opportunities, noting it has invested $2.9 billion in private-placement wind, solar, geothermal and hydroelectric projects worldwide in 2018, according to the report’s investment opportunities section.

“AIG’s diverse investment portfolio includes investments in both fossil fuel generation as well as renewable energy,” the report stated. “We recognize that by investing in clean energy technology, we diversify our portfolio and further enable those innovations to drop in cost, improve storage capability and expand uptake globally.”

A campaign to pressure U.S. insurers to commit to divesting current investments and pledge not to make future investments in coal projects has been ongoing. Chubb Ltd. became the first U.S. insurer to pledge to phase out its coal investments and insurance policies, saying on July 1 that it would no longer sell insurance to or invest in companies that make more than 30% of their revenue from coal mining.

In the risk management section of AIG’s report, the insurer noted that in 2018 it developed an internal U.S. hurricane model to provide a more bespoke view of the impacts of climate change on wind, storm surge and flood risks stemming from U.S. hurricanes. AIG used its internal flood model to create a view of flood maps in more than 25 countries, which the insurer said could be customized to incorporate climate change views for underwriting and pricing flood risk.

In its metrics and targets section, AIG noted that as an insurance company that does not manufacture or sell tangible products, most indirect upstream and downstream (Scope 3) emissions that occur in AIG’s value chain are not applicable. AIG’s emissions disclosures to date are limited to Scope 1 and 2 emissions associated with the insurer’s United Kingdom and New York City operations.