Australian Ethical pressures QBE over climate risk management

Australian Ethical co-filed shareholder resolutions with investment platform SIX, calling on QBE to improve disclosures around how climate change will impact its business.

To be voted on at the QBE annual general meeting today, the proposals call on QBE to immediately disclose how much of its current underwriting portfolio is likely to be withdrawn, reduced or repriced due to the immediate and long-term impacts of physical climate risk.

"QBE has confirmed that exiting certain lines of business reduced climate related volatility across their portfolio. We would like to understand how much more of the underwriting portfolio is subject to heightened catastrophe risk, including more specifically, the risks of continuing to underwrite new oil and gas projects," said Nathan Parkin, Australian Ethical's head of equities.

Australian Ethical, which owns about 2.9 million QBE shares, has been engaging with QBE on its response to climate change for a decade now. These resolutions signal an escalation of those efforts.

The resolutions also seek greater transparency around the safeguards in place to ensure the insurer's leadership team acts in the company's best interests where potential incentives or conflicts of interest arise from other board or director roles they might hold.

This relates to QBE's policy for insuring new oil and gas projects; QBE's incoming chair Yasmin Allen served as a director on both Santos and QBE's boards and has previously confirmed she does not recuse herself from board-level discussions about QBE's oil and gas policy.

Ethical stewardship lead Amanda Richman added that it's difficult to reconcile QBE's continued support for new oil and gas projects with its stated climate commitments and focus on long-term value.

"QBE's policy on underwriting new oil and gas projects lacks the ambition shown by their domestic and global peers, applying no restriction of substance to oil and gas expansion," she said.

"This is an extraordinary direction of travel for a company whose core business depends on reducing, not increasing, exposure to risk. It raises questions about in whose interests this policy was written."

QBE's board has recommended shareholders vote against the proposals put forth by Australian Ethical and SIX

"The board's role is to represent and serve the best interests of the company, including all shareholders, by making decisions and managing risks associated with the company's strategies, policies and performance. To do this effectively, the directors must consider a range of issues reflective of operating a large, global organisation with a diverse portfolio," QBE said.

"The board considers that the proposed amendment may result in issues promoted by a small number of shareholders being given increased prominence over other matters of importance to the company and its shareholders as a whole. Directors must have the discretion to balance the range of issues faced by the company and its multiple stakeholders in the context of operating a global business."

On the push for greater disclosure of risks, it said: "We do not consider that adopting the resolution would result in disclosures that provide a valuable assessment of our climate resilience or be decision-useful for the majority of our shareholders."

SIX said QBE's refusal to take action has left it trailing its peers; Allianz, Aviva, AXA, IAG, Suncorp, and Zurich have all made progress on stronger restrictions for new oil and gas projects.

"QBE cannot outsmart climate change. Not when the world is fast approaching the point of no return where insurance risk can't be transferred or absorbed by governments or consumers under strain from the rising costs of natural disasters," SIX senior ESG manager James Alexander said.

"It's valid for shareholders to question: how much of this delay is the result of a conflicts management policy that allowed a director of a fossil fuel company to participate in decisions around their fossil fuel underwriting?"