Sustainability Smokescreen – Analysis of AIG’s 2022 ESG Report
By Kerrina Williams
Overview
AIG released its 2022 Environmental, Social, and Governance (ESG) report in July. The report fails to demonstrate progress on its climate commitments. As a major insurance provider for coal, oil, and gas, AIG does not acknowledge how its continued support for fossil fuels actively exacerbates climate-related threats to its business.
On March 1, 2022 AIG purported to commit to restricting support for coal, tar sands, and Arctic exploration projects and reaching net zero across its underwriting and investments portfolio by 2050. The announcement made AIG the first U.S. insurer to commit to science-based emission reduction targets and to restrict insurance and investments for Arctic energy projects. AIG’s policies contain possible loopholes, failing to clearly define which tar sands and Arctic energy projects are ruled out, allowing the company to possibly insure toxic tar sand projects like the Trans Mountain pipeline.
This year’s ESG report is AIG’s first communication on its climate action in over a year, yet it fails to clarify or elaborate on how it will achieve its commitments. The report does not define which tar sands projects AIG is restricting coverage for or which areas of the Arctic are excluded, including whether the policy covers both oil and gas and how Arctic exploration activities are defined, and it fails to include a science-based roadmap to achieve net zero. If AIG intends to achieve this net zero goal, it must include an immediate end to support for fossil fuel expansion.
Since adopting its climate commitments, AIG has raised rates and curbed coverage for homeowners in climate-vulnerable areas while exacerbating climate harms by remaining a top global oil and gas insurer and continuing to insure fossil fuel expansion. The demands from climate advocates, climate-impacted communities, and Indigenous communities are clear and continue to be ignored—AIG must take immediate steps to end its support for the fossil fuel industry, beginning with eliminating all underwriting and financing for new and expanded fossil fuel projects.
Now is the time for action, transparency, and real climate leadership.
Where AIG Can Step Up
AIG’s commitment to net zero
AIG’s 2022 climate commitment included aligning its operations, underwriting, and investment portfolios with net zero greenhouse gas emissions by 2050 and sharing “science-based targets as part of its Net Zero roadmap, including for its planned phase-out of fossil fuels.” While this year’s ESG report shows that AIG took steps to reduce operations-related emissions, the company said little about its underwriting activities. The section of the report labeled “Path to Net Zero” provides nothing of the sort. It does not give any detail or interim goals showing how AIG will reach net zero for underwriting and investment portfolios by mid-century. Nor does it adopt science-based targets.
The Intergovernmental Panel on Climate Change warns that immediate and deep emissions reductions are vital to limiting global warming to 1.5°C. In the report, AIG states that it wants to lead by example and help shape the standards for net zero pathways. But it fails to show leadership in the most basic way: There is no place for supporting new or expanded fossil fuels in a science-based net zero plan, and yet AIG refuses to rule out that support.
Investments in renewable energy
AIG’s report claims that the company is positioning itself as a leading insurer of renewable energy. This is no more than a sad attempt at greenwashing. While AIG trumpets itself a leader on renewable energy insurance, it continues to be a leading global insurer of oil and gas. In 2022, AIG earned between $475-625 million USD from direct premiums for the fossil fuel sector.
AIG’s self-promotion to prospective investors reveals its real stance: It focuses on promoting services to the fossil fuel industry. The company’s “Energy Insurance” page highlights coverage for “offshore and onshore property, oil rigs, mining, utilities, and more.” It mentions renewables only once, coupled with fossil fuels as “power generation/renewables,” in between mentions of specialized solutions for oil and petrochemical, chemical, and mining property insurance.
Climate Risk
AIG notes that climate change has “significant financial implications” for its business, citing issues ranging from droughts and shifting temperatures to the transition to net zero carbon economies. The report outlines climate-related risks to AIG’s business in the short, medium, and long term, focusing on physical, transition, and liability risks. Here, AIG acknowledges that climate change contributes to more frequent and severe natural disasters. The section falls short though, as a well-rounded risk analysis would include how AIG’s own investments in fossil fuels are contributing to these risks to its business.
The growing consensus is that financial institutions must end support for new coal, oil, and gas projects in order to stay within safe climate limits. AIG is aware of climate-related risks to its business and should take immediate action to remedy its contribution to the climate crisis.
Conclusion
AIG continues to ignore its active contribution to global climate risk through its continued underwriting of fossil fuels. The company has become a black box in documenting the steps taken toward implementing its fossil fuels policy and leaving activists and investors wondering if the company’s 2022 policy changes were mere theater. In addition, although AIG is clearly aware of the massive risks that climate change poses to its business, it fails to demonstrate progress toward taking internal steps toward mitigating these risks.
To successfully pave the way toward a net zero future, AIG must commit to the following:
- Immediately stop insuring any new customers from the fossil fuel sector which are not aligned with a credible 1.5ºC pathway.
- Immediately stop insuring new and expanded coal, oil, and gas projects.
- Stop all insurance coverage for existing coal sector clients.
- Phase out insurance for oil and gas companies.
- Commit not to insure Freeport LNG in advance of the October 1, 2023 renewal date.
- AIG currently insures Freeport LNG, a methane gas facility in Freeport, Texas. Methane is an extremely potent greenhouse gas that is eighty times more potent than CO2 and responsible for about twenty five percent of global emissions.
- Commit not to insure the proposed East African Crude Oil Pipeline (EACOP).
- Unlike 23 other insurance companies, AIG has yet to rule out support for EACOP, which threatens protected ecosystems, critical water resources, communities’ rights, and our climate.
- Commit to uphold Indigenous rights and adopt a policy that denies coverage to projects that do not have the Free, Prior, and Informed Consent of impacted communities.
Additional Resources
- Public Citizen’s press statement on the ESG report
- Insure Our Future Campaign Demands
- Gwich’in Steering Committee Arctic Refuge Scorecard
- RAN Principles for Paris-Aligned Financial Institutions