One way to shut down the oil and gas industry is to make it impossible to buy insurance. To date only Societe General Generale SA. Australia’s Suncorp has stepped up to the will not insure the oil and gas projects. 

In the finance section of Bloomberg published on August 25th the following:

“A new analysis from Societe Generale shows that covering the biggest perpetrators of global warming is also bad for business.”

“While insurers (23 in all) have moved to end their underwriting of coal-related activities, they have been slow to act on oil and gas. That’s mainly because the insurance market for those fossil fuels is considerably larger, with estimated premiums of more than $17 billion in 2018, compared with $6 billion for coal power, said Peter Bosshard, program director at the Sunrise Project and global coordinator of Insure Our Future (IOF). 

Reducing exposure to oil and gas has to be the next environmental objective for the insurance industry, said Nick Holmes, the London-based head of the insurance research team at SocGen.”

“The United Nations’ Intergovernmental Panel on Climate Change has said oil and gas operations must be reduced to meet the Paris Agreement’s target of limiting global warming to 1.5° Celsius by 2050. Yet governments still plan to expand oil production by 20% over the next two decades. Oil Change International has said that CO2 emissions from existing oil, gas and coal fields and mines are likely to push the world far beyond 1.5°C unless urgent action to restrict oil and gas growth is taken.”

The Bottom Line

As you have heard me say in the past “Follow the money”. Well, that is very applicable in the world of ESG insuring of projects. If people think they can shut down the oil and gas projects that will save the planet, they need to look at the total picture. The “Greener” we go, the more fossil fuels we use. 

So the money and insurance is still investing in the oil and gas projects, and only dumping coal. Just asking the following questions for a friend. 

  • Will people give up their way of life?
  • Are people greedy? 
  • Why are the countries heavy in the renewable energy space bringing oil and gas power plants back online?
  • Why is coal use up in India, China, and other less fortunate countries? 
  • Why is coal remaining flat, and not decreasing in California? 

All of these questions all point to “selective memory loss” for some investors. They will publicly put pressure on insurance companies but will write the check if they smell money. 

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Send me your thoughts and would like to hear from you about your thoughts on the current market. Jay R. Young, CEO, King Operating

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