Environmentalists want insurers to 'come clean' on Adani policy
Environmental groups are demanding Bermuda-based reinsurance company Aspen Re explain its involvement with the Adani Carmichael Coal mine after it was revealed the firm was paid for covering early works on the project.
Leaked invoices from within insurance broker Marsh McLennan reveal Aspen Re was one of four global insurance companies paid for underwriting works on the controversial Queensland coal and rail project. Three of the insurers contacted by The Age and The Sydney Morning Herald - HDI, Liberty and XL Australia - said the policies were minor and would expire in the coming years.
However, Aspen Re refused to answer questions about which aspect of the project it had insured and whether these plans contradicted any corporate policies on climate change.
Marsh has been employed since 2015 to find insurers for the project, and one of its staff, who asked not be named, said Aspen Re was a likely contender to insure the mine and rail project as it was offshore. Marsh's chief executive also had a history dealing with Aspen Re, which made it more likely the firm would be a major player in underwriting the project, they said.
The construction of access roads at Adani's Carmichael mine site has begun after final Queensland government approvals.
Pablo Brait, a campaigner for shareholder activist group Market Forces, said the company's silence spoke volumes, and renewed calls for greater transparency. "Aspen Re needs to come clean on what their involvement on this project is and then make a commitment to not get further involved."
"Companies need to be transparent about the level of climate risk they are taking on and shareholders need to be informed of that risk," Mr Brait said. "The risk is not just financial, it's reputational because being linked to a highly controversial project like the Carmichael mine will harm the company's reputation and translate to financial risks down the track."
Queensland Premier Annastacia Palaszczuk refused to comment on why local insurers and banks had ruled out financing the mine. "They [Adani] have to work out their finances. We have been very clear about that all along, that is the same for any company in Queensland," she said.
Aspen Re was bought by global alternative asset manager Apollo in February last year for US$2.6 billion ($3.7 billion). The company's website boasts of responsible investment practices and pledges to "drive change" by putting environmental, social and governance factors "the core of what we do".
It is unclear if either of the companies have committed to limiting exposure to fossil fuels, but a white paper written by Aspen Re in April last year acknowledges the severity of the risk posed by climate change.
"It is beyond reproach that the Earth’s climate is changing in ways that will undoubtedly present negative impacts that will be bourne on some level by every person and business," the white paper said. "Many of the scientific models present catastrophic damage scenarios occurring relatively soon – within the lifespan of our children.
"The monetary cost of climate change – be it for adaptive actions or failure to adapt, will be enormous, eclipsing the GDP of many developed countries for decades to come. Injury and damage to persons, property, businesses, governments, ecosystems and natural resources, to name but a few, are unfortunately unavoidable at some level."
Carbon emissions from burning fossil fuels is the world's primary cause of climate change. Adani has approval to produce up to 60 million tonnes of thermal coal each year. Most of the coal will be exported and therefore the emissions do not impact Australia's commitment to reduce emissions by 26 per cent on 2005 levels by 2030.
Aspen Re's white paper recognises demand for thermal coal in India may dry up as the government seeks low-carbon economic growth. Adani's financial accounts show it made a $279 million loss for the year ending March 31 and construction on the project has been slow. Aspen Re did not respond to questions about the long-term viability of the Adani project.
The world's largest insurance broker Marsh has been tight-lipped on which insurers are backing the mine, and an Adani spokeswoman insisted the project was fully covered but details were confidential. The Marsh source said Aspen Re was likely to play a larger role, but the strategy of dividing risk between many insurers on short-term, rolling contracts would continue.
"If something's dirty and risky it's logical they would divide the risk among many to minimise exposure for any sole provider," he said.
The big four Australian banks and insurers Allianz, Suncorp and QBE have ruled out financing the project and have made commitments to reduce their exposure to thermal coal projects.
Corporate Australia's move away from thermal coal reflects a global trend where insurers are leading the pack. A 2018 report by NGO Arabella Advisors found the global insurance sector is responsible for $3 trillion of the $6.2 trillion divested from the fossil fuel industry.