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(Reuters) — Lloyd's of London is scaling back its exposure to coal and oil sands, the commercial insurance market said in its first sustainability report on Wednesday, in a reversal of its traditional hands-off approach to climate change strategy.
Lloyd's acts as regulator for around 100 syndicate members and leaves decisions on underwriting and investment strategy to them.
But other regulatory bodies, such as the Bank of England, have stressed the risks of climate change for financial institutions.
“This is the first time we have set an ESG (environmental, social and governance) strategy for the Lloyd's market, and it represents an important milestone on the journey towards building a more sustainable future,” Chairman Bruce Carnegie-Brown said in a statement.
Lloyd's has come under fire from activists because its members have insured controversial projects such as Adani Enterprises' Carmichael thermal coal mine in Australia and the Canadian government's Trans Mountain oil pipeline.
European insurers like Axa and Zurich have already pulled back from underwriting fossil fuels such as coal and oil sands, though U.S. and Asian insurers have mainly retained their exposure.
The Lloyd's Corporation and its members will end new investment in thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities from Jan. 1, 2022, Lloyd's said in a statement.
It would phase out existing investment in companies that derive 30% or more of their revenue from those sectors by the end of 2025.
Lloyd's also said it was asking members to stop providing new insurance cover for thermal coal, oil sands or new Arctic energy exploration from Jan. 1, 2022, with a target date of Jan. 1, 2030, to phase out the renewal of existing cover.
Lindsay Keenan, European coordinator for activist group Insure Our Future, welcomed the policy but said Lloyd's should act sooner.
“Lloyd's' 2030 deadline is not justified by climate science and the urgent need for action,” he said.
Lloyd's also set a target for its members to derive 2% of their premium income from sustainable insurance products by 2022 and said it would set out a roadmap for transitioning to net zero for its own operations by 2025.
Mxolisi Mgojo, president of the Minerals Council South Africa, has said that it is becoming trickier and costlier to get insurance policies renewed for coal projects, Daily Maverick reports. “Just trying to get insurance renewals, which [are] mostly from the international insurance industry, is difficult,” Mr. Mgojo said.