In May, the United Kingdom’s version of the Securities and Exchange Commission will begin enforcing its pledge to crack down on so-called greenwashing by companies wishing to trade on the label of being green-friendly.
The Financial Conduct Authority’s rules, announced in late November, come as U.S. traders await stronger regulations from the SEC. That body moved in September to curb misleading marketing practices by requiring 80 percent of funds that claim to be “sustainable,” “green,” or “socially responsible” to actually be so.
The sustainability disclosure requirements are now deemed a necessity after regulators found “environmental, social, and corporate governance” analysts at Goldman Sachs and Germany’s DWS Group were promoting investments that were not as ESG-friendly as they claimed.
“The portfolio managers weren’t necessarily doing all of the work that they said they were doing,” the associate director of sustainability research for Morningstar Research Services LLC, Alyssa Stankiewicz, said. “They didn’t have documentation or data maybe related to the ESG-ness of these investments.”
At the same time as ESG-friendly firms are facing accusations of insincerity, they’re also coming under pressure from state pension funds in states with Republican-controlled governments that don’t want their employees’ retirement funds affected by what they view as politicized, left-leaning investing strategies.
The federal government has launched an investigation into Florida’s largest home insurance company.
Citizens Insurance, the governor, and other state leaders received a letter informing them that a Senate budget committee is looking into the state-run company.
Citizens insure $586 billion worth of property, and they have just over $15 billion in their reserves to pay out on claims. If a major hurricane hit the state, they could be short over $571 billion, leaving everyone in the state on the hook to pay the shortfall.
The letter from the Senate committee investigating the state backed company expresses concern it may be unable to cover its losses. A claim the governor confirmed while visiting Fort Myers last year.
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Mark Friedlander with the Insurance Information Institute said a private insurer would not be allowed to operate in the State of Florida with those financial dynamics.
Seven private companies went insolvent in the last year and a half in Florida.
“Citizens, unlike a private insurer, could never go insolvent,” Friedlander noted.
That’s because the state could initiate a hurricane tax to cover its costs which would require everyone who owns property or a car to pay a hurricane tax.
As of 2022, Citizens’ market share for homeowners multi-peril policies was approaching 20 percent, having more than doubled since 2020. As private insurers in Florida continue to go insolvent or exit the state, Citizens’ market share will likely continue to grow. At 20 percent market share, Citizens’ losses could be as high as $36 billion in the scenario studied by Swiss Re or $162 billion in the scenario studied by Cambridge and Munich Re (assuming that 60 percent of total losses are insured). If Citizens had to raise $162 billion to cover losses, that would result in an approximately $20,000 assessment for every homeowners insurance policyholder in Florida.
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To that end, please respond to the following requests for information and documents by December 21, 2023:
1. What modeling or other analysis has Citizens done to estimate its total potential exposure to various worst case hurricane scenarios? What is the upper range of Citizens’ potential losses? Please provide all documents and communication relating to modeling, analysis, and estimates of Citizens’ potential losses.
2. What modeling or other analysis has Citizens done to estimate its market share over the next decade? What does Citizens project its market share to be in each of the next 10 years? Please provide all documents and communication relating to modeling, analysis, and estimates of Citizens’ future market share.
3. What modeling or other analysis has Citizens done to determine its ability to fully pay out claims resulting from various loss scenarios? Please provide all documents and communication relating to modeling, analysis, and estimates of Citizens’ financial position and (in)solvency under such scenarios.
4. What are Citizens’ current assets? What is Citizens’ total reinsurance coverage? What are the maximum total claims Citizens would be able to pay out without having to levy an assessment on Florida policyholders? Please provide all documents and communication relating to modeling, analysis, and estimates of Citizens’ current assets, reinsurance, and ability to pay claims.
5. What communications has Citizens had with Governor DeSantis, Insurance Commissioner Michael Yaworsky, their staffs, or any other state officials regarding Citizens’ current or future solvency? Please provide copies of these communications.
6. What communications has Citizens had with Governor DeSantis, Insurance Commissioner Yaworsky, their staffs, or any other state officials regarding what Citizens and/or the State would do if Citizens were unable to cover its losses? Please provide copies of these communications.
7. Has Citizens contemplated asking for a federal bailout if it were unable to cover its losses? Has Citizens discussed the possibility of a federal bailout with Governor DeSantis, Insurance Commissioner Yaworsky, their staffs, or any other state officials? Please provide copies of these communications.
You can do this with anything! Absolutely anything:
Horrible Coal Inc. wants to raise money.
It sets up a special purpose vehicle, Hypertechnical Investments Ltd.
Horrible Coal issues bonds to Hypertechnical Investments.
Hypertechnical issues its own bonds to ESG funds: “We are just a little old investment firm, just two traders and two computers, no carbon emissions here! And our credit is very good, because we have no other liabilities and our assets are all investment-grade bonds. ‘Which investment-grade bonds,’ did you ask? Sorry, I’m not sure I heard you right, you’re breaking up. Anyway we’ll look for your check, bye!”
Though my made-up names are silly, and in the actual Aramco case one of the not-an-oil-company SPVs is named “GreenSaif Pipelines Bidco.” “Pipelines” is right in the name! The only way you would think that GreenSaif Pipelines Bidco “had no direct links to the fossil-fuel industry” is if (1) you started reading the name but stopped after you got to the “Green” part (plausible!) or (2) you never read the name at all, never thought about it, just looked at the balance sheet and saw only shares of stock, not pipelines or oil wells, and said “ah, stock, well, that’s green enough.”
Welcome back to the 101st edition of Data Vis Dispatch! Every week, we’ll be publishing a collection of the best small and large data visualizations we find, especially from news organizations — to celebrate data journalism, data visualization, simple charts, elaborate maps, and their creators.
Recurring topics this week include pollution, transportation, and high temperatures. Plus: an opportunity to work on the Dispatch yourself as our Werkstudent*in.
Craig Allen recently accomplished a personal first as an ecology professor by getting listed on a patent for a fireball-dropping drone.
“For me, because I expect that I will probably never have another patent in my life, because I do science that’s generally not patentable and I really don’t have the capacity for that kind of thing, the patent is fully unique and, thus, will have a special place in my heart,” said Allen, director of the National Science Foundation Research Traineeship at Nebraska.
He worked with agronomy professor Dirac Twidwell, computer science professors Sebastian Elbaum and Carrick Detweiler, and former Nebraska students Christian Laney, James Higgins and Evan Michael Beachly in developing IGNIS, the drone product.
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At first, the three discussed using drones as a less dangerous way to sample invasive species like zebra mussels in Nebraska waters. Then, when a person was injured on an ATV during a prescribed burn, the three professors turned to discussing using drones in prescribed burns.
Allen said about 40,000 acres of rangeland in Nebraska are invaded by trees every year and fire is the best way to control that.
Typically, firefighters on ATVs or in helicopters carry out prescribed burns, but both methods can be dangerous.
Prescribed burns are a proven way to reduce the impact of destructive wildfires, but they still come with risks to the firefighters who carry them out. That was the impetus behind a project from the National Science Foundation’s National Research Traineeship (NRT) program at the University of Nebraska-Lincoln (UNL) that uses a drone to drop fireballs to ignite prescribed burns, keeping firefighters out of harm’s way.
I spoke to Rex Frazier, president of the Personal Insurance Federation of California, who cited several policies that no doubt contributed to State Farm’s decision to stop issuing policies, including various price controls that prevent insurers from raising prices to meet surging costs without the written approval of the California Department of Insurance.
“California is the only state in the country that doesn’t allow insurers’ rates to be based upon actual reinsurance costs,” Frazier said. “California’s regulations employ a legal fiction that each insurer uses its own capital to serve customers. As reinsurance costs go up, insurers cannot have their rates reflect those higher costs.”
State Farm General Insurance Co. last week became the latest insurer to retreat from California’s homeowners market. The culprit isn’t climate change, as the media claims in parroting Sacramento talking points. The cause is the Golden State’s hostile insurance environment.
The nation’s top property and casualty insurer on Friday said it won’t accept new applications for homeowners insurance, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”
In other words, State Farm can’t accurately price risk and increase its rates to cover ballooning liabilities. Other property and casualty insurers, including AIG and Chubb, have also been shrinking their California footprint after years of catastrophic wildfires, which are becoming more common owing to drought and decades of poor forest management.
CalPERS and CalSTRS are two of the largest pension funds in the country (by both membership and portfolio size). As California Senate Bill 252, a bill calling for fossil fuel divestment from public retirement systems in California, continues to move along in committee, CalPERS and CalSTRS have publicly opposed the bill because it conflicts with their duties as pension plan managers.
As ALEC VP of Policy Lee Schalk and I mentioned in our OC Register column last month, politicized investment strategies are a recipe for disaster. Research from Mike Edleson and Andy Puzder found that ESG investing yields lower returns than investing without political constraints. Additionally, researchers at Boston College found that ESG has failed to achieve its stated social goals.
Both CalPERS and CalSTRS realize that divestment hampers their ability to put members’ retirements benefits first, and the research shows divestment does not achieve its stated social goals.
Guess who the largest investors in climate-harming energy companies are? That would be major asset managers, with BlackRock and Vanguard Group the biggest offenders. So says an environmentalists’ report, “Investing in Climate Chaos.”
The report, spearheaded by Urgewald, a German environmental group, and conducted “in partnership” with more than 20 other nongovernmental organizations, comes down hard on two financial service stalwarts in particular: Vanguard, the mutual fund powerhouse, and BlackRock, the world’s largest asset manager.
Beyond those two, half of the stakes in fossil fuel companies identified in the report are held by just 23 investors. What’s more,18 of them are U.S.-based, the advocacy group stated, basing the report on data collected in January.
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BlackRock has positions in oil and gas companies that account for two-thirds of the world’s yearly hydrocarbon production, per Urgewald. Its single largest energy holding is also Exxon, which is the firm’s ninth biggest equity position overall. . Although the asset manager has a policy against investing in any business that gets at least one-quarter of its revenue from coal, the report charged that BlackRock exempts power companies that use coal. “As a result, BlackRock remains the world’s largest investor in coal developers,” it said.
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In the past, BlackRock has responded to critics on the right and the left by saying that, while it supports ESG, is not about to “dictate how clients should invest.” In a statement, it declared that “transition to a low carbon is in the interest of realizing the best long-term financial results for our clients.”
Vanguard, also under GOP attack, has made much the same argument. It did raise environmentalists’ ire last year when it quit the investment-industry initiative on combating climate change, saying it wanted to “speak independently on matters of importance to our investors.” Some contended that Vanguard was just knuckling under to politicians’ pressure.
Two bills in the Illinois legislature this session will require air conditioning, or at least a common room with air conditioning, in buildings housing seniors.
Last May, when a heat wave sent temperatures in Illinois soaring into the high 90s, three older women living in state-subsidized housing died of heat exposure in the Rogers Park neighborhood of Chicago. The three seniors, Delores McNeely, 76, Gwendolyn Osborne, 72, and Janice Reed, 68, were constituents of state Sen. Mike Simmons, D-Chicago. Two separate bills now aim to prevent these types of deaths,
Simmons sponsored a proposal that would require all state-funded affordable housing to have air conditioning. The bill passed the state Senate in March.
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In March, the National Low Income Housing Coalition and Housing Action Illinois found that Illinois is lacking 300,000 affordable housing units for the 443,746 poorest households in the state. For every 100 extremely low-income renters, there are only 34 affordable and available units, the report found.
The report defines “very low income” in the Chicago area as households that earn less than $31,250 a year for a family of four, and $22,000 a year for a single person. Many seniors on Social Security live on half of that, Palmer said.
