This week in the U.S., a coalition of 60 businesses called on American insurers to stop providing coverage to and investing in the fossil fuel sector. This is part of a growing movement, which has already achieved a measure of success in Europe, and is now spreading to the U.S., in an effort to reduce the impacts of global climate change. European insurers have, over the past few years, rolled out policies to deliberately exclude fossil fuel producers, and the number of insurers worldwide doing this doubled in 2019. Moody’s Investors Service has praised European insurers’ rapid move away from the coal sector, giving them better credit scores for their positioning to “benefit from the financial opportunities presented by carbon transition.” This lack of financing has been felt by the industry, with miners having to exit their coal positions or finding alternate sources of funding.
The hurricanes on the Gulf Coast and the wildfires raging across the West Coast of America have highlighted the climate reality we all face. A recent report commissioned by the U.S. Commodity Futures Trading Commission’s Climate-Related Market Risk Subcommittee has called climate change a “major risk” to America’s financial system and economy.
ESG concerns have been a growing influence in both the mining and financial sectors and we have seen many global mining companies move away from coal in recent years. Graham Knight, Head of Global Natural Resources at Willis Towers Watson notes that “In these unprecedented times, the mining industry finds itself beset by challenges from all sides, as COVID-19 tightens its stranglehold on the global economy and insurance market conditions harden. However, it is the issue of climate risk and ESG that will have a more significant impact on the future shape of the industry. Mining companies must incorporate ESG, above all climate change into their risk mitigation strategies in order to survive in the future.”
The energy transition is already underway and it is important for the mining industry to recognize how it will affect the industry overall as well as their operations. ESG pressures will continue to affect the industry, all helping with the energy transition to renewables and helping to ensure a greener future.