With its updated coal exclusion policy Allianz has committed to the following new measures.
On the direct insurance of specific projects, it has scrapped its exceptions for coal plants, and now excludes coal infrastructures projects in addition to coal mines and coal plants.
Regarding companies exclusions, it has updated its exclusion criteria for both its insurance business and its own investments:
- Regarding developers, it plans to exclude coal mine developers*, coal plant developers and “coal service providers”. These exclusions will apply from January 1st 2023. They will complement the exclusion of coal plant developers with over 0.3Gw of new coal capacity planned which already applies for its investment portfolio.
- Regarding large coal companies, Allianz had already committed to exclude from 2023 onwards all coal companies generating more than 25% of their revenues or electricity from thermal coal AND extracting over 50Mt of coal annually/above 5 GW of coal power capacity. It will now exclude at that time all companies over the 25% threshold OR over 10 Mt of coal extracted annualy/5Gw of coal power capacity.
For its coal phase-out plans, it was already aiming for a total coal phase-out worlwide by 2040. It has completed its intermediary steps:
- In 2025 a maximum of 15% revenues from coal
- In 2030 a maximum of 5% revenues from coal, with an exception (10%) for Asian countries
A last element is the addition of an exemption for coal companies when they are assessed by Allianz as “aligned with a 1.5°C pathway” and of a possible exemption from these exclusion criteria when coal companies are deemed “aligned to a well below 2°C pathway”. These exemptions do not apply to coal developers.
On oil & gas, Allianz adopted these first measures for its insurance business from July 1st 2021:
- No insurance and facultative reinsurance for dedicated oil sands projects and new oil sands pipelines;
- No insurance and facultative reinsurance for companies deriving more than 20% of their revenues from oil sands.
Allianz has also decided to exclude the following companies from the tar sands sector in its own investments:
- companies deriving more than 20% from upstream revenues for shares;
- all companies extracting oil sands and companies deriving more than 20% from midstream revenues for shares and bonds directly managed;
- companies deriving more than 20% from upstream or midstream revenues for shares and bonds in funds.
In these funds, Allianz will also exclude any oil sands projects and it will limit to 20% the share of companies involved in the tar sands sector.
2. Our analysis on coal – Stricter exclusion criteria, but loopholes remain
The decision of Allianz to stop insuring almost all new coal projects, including coal infrastructure, is welcome. That’s an important step forward.
The commitment not to insure and to divest from coal developers is also a great step forward. However, such a commitment does not come into force this year but only in 2023, whereas other insurers such as AXA already committed to excluding developers from all coverage. Given that any new coal project is inconsistent with the remaining carbon budget, it’s reasonable to expect Allianz to be consistent with its pledge to become a net-zero insurer and investor. This would mean immediately extending its previous zero tolerance for investment in coal plant developers to all companies with coal expansion plans in all business lines. Moreover, the restricted definition adopted by Allianz regarding coal mine developers may allow some companies to slip through the net.
The strengthening of its exclusion criteria (relative and absolute) is, even if slightly late, equally welcome. Allianz was indeed planning to apply certain exclusion thresholds, but the conditions were cumulative, whereas now, exceeding any of those is sufficient for an exclusion from Allianz’s investment portfolio and insurance coverage. This shrinks the space left for coal companies to maintain their old bad habits, if they want to continue working with Allianz.
However, the new exemption framework Allianz has introduced with its new policy is questionable: Allianz will allow some exceptions for companies that the insurer will consider, with the backing of “independent third-party target as well as performance assessments”, to have adopted “a credible and public strategy to transition away from coal at a pace which is compatible with the scientific pathways of limiting global warming to 1.5°C”.
- It’s unclear what criteria will be taken into account by Allianz to qualify a coal exit plan as being aligned with a 1.5°C trajectory. The only information provided is that companies that are planning new coal projects could not qualify for these exceptions. More transparency on these criteria would be welcome, in particular the details of how Allianz will determine the pace of closure. According to the IPCC and research by Climate Analytics, we must reduce by 78% the use of coal and most coal assets must be closed by 2030, and all by 2040.
- Companies assessed as aligned with 2°C pathway or higher won’t be granted any exception, and no new financial services will be granted to companies assessed as aligned with a well below 2°C pathway. Allianz will engage with these latest companies and provide them new financial services at the condition they update their transition strategy and align it with a 1.5°C trajectory. Under this new policy, only companies assessed as being aligned with a 1.5°C pathway will be exempted from exclusion.
- Allianz mentions that it will rely on a number of external analysis and frameworks (Climate Action 100+; Net-Zero Company Benchmark; Carbon Tracker; the Transition Pathway Initiative; the Global Coal Exit List; and the Science Based Targets initiative) to process its internal analysis. However, as for the coal exit plan, Allianz could clarify what key requirements will have to be met to be assessed as aligned with a 1.5°C pathway. For example, it should commit to not exempt companies that switch from coal to gas or from coal to biomass.
- To avoid any doubt on the credibility of its policy, Allianz should annually disclose the number of exceptions made, along with the rationale behind them.
Finally, Allianz’s commitment to reduce to 5% its exclusion threshold as of year-end 2029, with the exception of Asia where 10% will apply, shrinks the space for the most problematic European coal companies to qualify for the exemptions. However, the exception for Asia implies that South Korea, an OECD country, could exit coal after 2030, which is not aligned with best practices and climate science.
Allianz (Re/Insurer) scores in the Coal Policy Tool
Allianz (Asset owner) scores in the Coal Policy Tool
These tables assess the coal policy of Allianz as re/insurer and as an asset owner according to the five criteria of the Coal Policy Tool
3. Our analysis on tar sands
Regarding the oil & gas sector, Allianz has published new tar sands exclusion criteria. The threshold chosen (20%) remains however very high, whereas other insurance companies have already gone further. For instance, Generali chose a 5% maximum threshold for tar sand extraction and operators of controversial pipelines linked to tar sand transportation. This could serve as an example for Allianz to strenghten its exclusion framework. But the biggest gap in the policy lies in the absence of the exclusion of companies planning any new projects in the oil sands and other unconventional fossil fuel sectors, which is an even more important exclusion criteria.
However, it is important Allianz urgently tackles fossil fuel expansion in the whole oil & gas sector and not only for tar sands if it is serious about ending all support towards practices not aligned with a 1.5°C trajectory.