AIA's toxic little secret
AIA, Hong Kong's flagship insurance company, is aiming high. It has pledged to "help people live healthier, longer, better lives" and aspires to be "the world's pre-eminent life insurance provider." However, the life insurer is lagging behind its peers in one critical aspect.
AIA tries hard to live up to its healthy brand. It offers its customers rewards for exercising regularly, eating healthy food and not smoking. It screens the companies it invests in against such criteria as climate change and labor relations. It is considered the best company to work for in several Asian countries and was even ranked as the world's most respected life insurer by Forbes magazine in 2019.
Alas, AIA has a toxic little secret. Unlike most of its global peers, the life insurer still invests in dirty coal.
Research by a Hong Kongbased analyst found that the company has likely invested about US$6 billion in the coal industry. Its holdings include
Tenaga Nasional Berhad, the utility that relies mostly on coal for its power plants in Malaysia and other countries. Dollar for dollar, AIA's investment portfolio produces almost 50% more carbon emissions than the portfolios of environmental leaders from emerging markets.
Investing in coal squarely contradicts AIA's commitment to healthier, longer, better lives. From the mine mouth to the power plant, coal contaminates water and air with heavy metals, soot and other pollutants. Globally, coal-related pollution is said to be responsible for more than 800,000 premature deaths every year, in addition to millions of people falling ill with cancer, heart attacks and respiratory diseases such as asthma.
Burning coal is also the single biggest source of carbon emissions. Climate change fueled by these emissions is driv- ing ever worsening heatwaves, droughts, floods and typhoons throughout Asia and the rest of the world.
United Nations Secretary General António Guterres has repeatedly called for an end to the construction of new coal projects from 2020.
Insurance companies have a self-interest in promoting public health, climate action and a sound environment. A life insurer investing in coal is as shortsighted as a hospital selling tobacco.
By now 143 major international financial institutions have adopted coal restrictions. As part of this trend, at least 62 major insurance companies with combined assets of $11 trillion have divested from coal.
In line with its commitment to fighting climate change, AIA has joined the Climate Action 100+ investors initiative. Yet among the 20 insurance companies that have joined this initiative, only AIA and two small local insurers are still investing in coal. This shows just how isolated the Hong Kong insurer is with its coal business.
Even Tottenham Hotspur, the soccer club that has become AIA's global brand ambassador, is supporting the greening of investments. Last month Spurs became a founding member of the climate campaign "Count Us In," which encourages people to "choose financial institutions and funds that invest responsibly."
Since coal-based electricity is being out-competed by renewable energy, divesting from coal also makes good business sense. In each of the past five years the US coal index has on average lost more than 25% of its value. In comparison, the S&P 500 index gained an average of 11% per year during this period. Investors in other words have made an annual profit of almost 37% on shifting their assets out of the US coal industry since 2015.
In June, AIA appointed a new chief executive officer, Lee Yuan Siong. He should align the insurer's investments with its public brand and live up to its ambitions as a corporate leader. Under Lee's leadership AIA needs to divest its assets from all coal companies and increase its investments in renewable-energy projects that respect human rights.
Divesting from sectors that are not compatible with its mission and brand is not a foreign concept for AIA. According to its responsible-investment policy, the life insurer already excludes companies manufacturing tobacco and cluster ammunition from its investment portfolio.