In a sign that environmental pressure is escalating, many of the world’s biggest insurers have now said that they will not cover the proposed Adani coal mine in Carmichael.
The coal-powered plant needed to be self-funded, as major investors were concerned over the long-term viability of the resource. Many companies are under pressure to move away from what is considered to be the dirtiest fossil fuel.
With climate talks becoming a more constant topic in investment circles, trends are heading toward investments in more renewable sources of energy than coal, and now this sentiment appears to have spread to insurers. Without such backing, the Carmichael mine is likely to have a harder time going ahead, but it does not seem to be out of options at this stage.
However, Allianz, AXA, Swiss Re, Munich Re, and two Australian companies, Suncorp and QBE, have all said that they will not be allowing Adani to take out insurance, and some have said that they will not support any coverage for coal extraction. There has also been a confirmed denial from FM Global, which was the first big insurer in the US to set out a stance on coal.
This news appears to be one of the biggest market signals yet that the tide is finally turning on coal, which was once considered a particularly valuable resource. Its value is dropping by the year, and the pressing need to act on climate change has sped up these kinds of decisions, but many governments whose energy mix is reliant on coal are reluctant to phase it out entirely.
The Australian government recently admitted that it has no plans to stop using coal-powered plants and said that coal is a vital part of the national energy infrastructure. However, with yet another set of elections looming early next year, this could well change quickly.
At present, there are still options on the table for Adani, as not every insurer has ruled out funding the mine. Berkshire Hathaway and AIG have still not made any statements, and other companies have not officially ruled out covering the mine in the future.
The need for Adani to self-finance shows the difficult position that it is in. All of Australia’s major lenders vetoed the offer to finance it, and at least 37 known global financial institutions chose to stay away from coal.
Most of the pressure on businesses to avoid Adani is due to a campaign called Unfriend Coal. One of the NGOs supporting this is Market Forces, and its Executive Director, Julien Vincent, is happy that no private backers have provided funding for the Carmichael mine. If all insurers stay away from the deal, then this would be a strong showing of intent.
The mine cannot legally proceed until it can acquire insurance, and the situation seems to be a political tipping point. It is now the tester subject for many similar cases in the future. If coal mining is not a safe asset to invest in, then there is a chance that it will have even less support going forward.