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Insurance Funds Worth $1.2T Urge G20 to Stop Funding Fossil Fuels by 2020

Three of the world’s largest insurers have called on G20 leaders to implement a timeframe for the end of fossil fuel subsidies when they meet in China this week. The G20 has already committed to phase out “inefficient fossil fuel subsidies that encourage wasteful consumption” over the “medium term.” In May, the G7 nations pledged to achieve this by 2025.

Three of the world’s largest insurers have called on G20 leaders to implement a timeframe for the end of fossil fuel subsidies when they meet in China this week.

The G20 has already committed to phase out “inefficient fossil fuel subsidies that encourage wasteful consumption” over the “medium term.” In May, the G7 nations pledged to achieve this by 2025.

When the leaders of the world’s 20 largest economies meet in Hangzhou for the G20 Summit on Thursday and Friday, multinational insurers Aviva, Aegon and Amlin contend that they must go further, and commit to an end to assistance for fossil fuel companies within four years. These three companies manage $1.2 trillion in assets.

“Climate change, in particular, represents the mother of all risks – to business and to society as a whole,” said Aviva CEO Mark Wilson. “And that risk is magnified by the way in which fossil fuel subsidies distort the energy market. These subsidies are simply unsustainable.”

It’s in the insurance industry’s best interest to move the needle on actions that could help mitigate climate change and related disasters - as extreme weather events continue to increase in frequency, insurance companies are being hit where it hurts in terms of payouts related to disaster recovery.

Estimates of fossil fuel subsidies vary widely depending on the definition of a subsidy. The OECD reports that its member states contribute $160-200 billion each year to the production of coal, oil and gas. But the International Monetary Fund (IMF) has said this neglects to account for the damage to the environment and human health for which governments carry the cost. The IMF estimates this to amount to a staggering $5.3 trillion a year, or $10m per minute.

“We’re calling on governments to kick away these carbon crutches, reveal the true impact to society of fossil fuels and take into account the price we will pay in the future for relying on them,” Wilson said.

Shelagh Whitley, research fellow at the Overseas Development Institute (ODI), said the current G20 pledge to end fossil fuel subsidies was “empty” if it lacked a concrete timeline. ODI’s own estimate puts fossil fuel subsidies at $444bn each year.

“These subsidies fuel dangerous climate change,” Whitley said. “If we are to have any chance of meeting the 2C target set at the Paris climate summit, then governments need to start a program of rapid decarbonization. The finance sector recognizes the importance of moving away from fossil fuels, governments need to realize they may be the only ones left not moving.”

Indeed, more and more investors have begun to move away from fossil fuels - including, notably, the Rockefeller Family Fund, which earlier this year denounced the very industry on which its namesake founder built his wealth. While more and more research points to clear economic (as well as environmental) benefits to phasing out fossil fuel subsidies, recent studies also show billions in losses for conventional energy investments and corresponding gains in cleantech.

Today’s statement by the insurance giants was also signed by the Institute and Faculty of Actuaries (IFoA) and Open Energi. It comes six days after 130 investors issued a similar pre-G20 representation. In the US, the Sierra Club has also launched a campaign calling on the Obama administration to back the same target.

The curbing of emissions related to the burning of fossil fuels is especially relevant in China, where major cities including Beijing and Shanghai continue to endure hazardous levels of air pollution.