U.S. Insurance Companies’ Response to Climate Change Impacts Investment Risks

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CalSTRS says new report shows more action from the insurance sector is needed

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CalSTRS CEO Jack Ehnes

“More importantly, the report gives us better perspective on how well, or not, insurance companies are responding to climate change risk,” said CalSTRS Chief Executive Officer, Jack Ehnes.

A new report from Ceres ranks the nation’s 330 largest insurance companies on their response to climate-related risks and finds a profound lack of preparedness. CalSTRS currently holds $4.3 billion of investments in the insurance sector, which represents 2.4 percent of the overall portfolio. CalSTRS believes that climate-related risks and opportunities can affect the performance of its investments.

The Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations was released today by Ceres, a nonprofit sustainability organization mobilizing business and investor leadership on climate change and other sustainability challenges, ranks property & casualty, health, and life & annuity insurers that represent about 87 percent of the total U.S. insurance market. Ceres found strong leadership on the issue in fewer than a dozen companies nationwide.

“Environmental, social and governance risks and issues such as climate change are very real for CalSTRS. This new report enables large institutional investors to be more mindful of market exposure to environmental risks through our insurance investments,” said CalSTRS Chief Executive Officer Jack Ehnes. “More importantly, the report gives us better perspective on how well, or not, insurance companies are responding to climate change risk.”

The report states, “… insurers are on the veritable ‘front line’ of climate change risks, and there is compelling evidence that those risks are growing. Rising sea levels and more pronounced extreme weather events will mean increasingly damaging storm surges and flooding. Hurricane Sandy alone resulted in over $29 billion in insured losses.”

“Meaningful change in the recognition of climate risk to the investment portfolio will come from an alignment of interests, and who better to take leadership this effort than the insurance industry,” added Ehnes. “The foundation of the insurance model is based on risk analysis, so ignoring the risk of climate changes seems most imprudent. Clearly, more action on the part of the insurance sector is needed.”

The report is based on responses to a climate risk survey developed by the National Association of Insurance Commissioners. Ceres ranked companies on climate-related indicators such as governance, risk management, investment strategies, greenhouse gas management and public engagement.    

The California State Teachers’ Retirement System, with a portfolio valued at $ 186.4 billion as of September 30, 2014, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California's 868,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts. Follow us onTwitter @CalSTRS

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Gretchen Zeagler
California Teachers Retirement System
(916) 414-1440
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