You can say one thing for California’s initiatives aimed at stemming fossil-fuel-driven climate change: They have the ability to drive conservative politicians from oil, gas and coal states batty.
There’s no other explanation for the overheated and borderline hysterical letter issued this week by attorneys general (and one governor) from 13 such states, threatening to sue California Insurance Commissioner Dave Jones over his Climate Risk Carbon Initiative. The initiative, which requires insurance companies doing business in California to disclose their investments in fossil fuels, yielded a searchable public database that went online earlier this year.
Jones’ rationale is that investments in these industries are destined to be losers as the nation moves toward renewable fuels. Therefore it makes sense for “investors, policyholders, regulators and the general public can know the extent to which insurance companies are invested in the carbon economy.” Jones also requested, but didn’t require, that insurers divest from the thermal coal industry. This, he said, would “help reduce coal combustion, the single largest contributor to global climate change in the United States.” His initiative applies to insurance companies that do business in California and raised $100 million or more in premiums nationwide.
If you continue to call for divestment ... of fossil fuel investments, we will be forced to consider the legal areas of relief available.
To the letter-writers, the disclosure requirement is tantamount to an “attempt to regulate the nation’s energy industry.” Jones’ request for divestment, they told the commissioner, is “the equivalent of a pledge of loyalty to your commitment to refrain from future coal investments.” They accuse Jones of being “driven by politics unrelated to insurance regulation” and of “using your office to promote social causes.”
It’s true that Jones has announced his candidacy for California attorney general in 2018, and one supposes that might look scandalous to the elected officials of 13 fossil fuel states who would never stoop so low as to engage in politics or to take stances on social issues, whether they involve climate change, reproductive health, abortion or any other issues that have crossed the desks of not a few of the red-state signatories.
The letter was spearheaded by Oklahoma Atty. Gen. Mike Hunter, the successor to Scott Pruitt, now the Environmental Protection Agency administrator, who made his name suing the EPA on behalf of fossil fuel companies. Hunter obtained signatures from the attorneys general of Alabama, Arkansas, Indiana, Louisiana, Missouri, Montana, North Dakota, Texas, Utah, West Virginia and Wyoming, as well as Gov. Matt Bevin of Kentucky. Their missive closed with an almost Trumpian threat to sue: “If you continue to call for divestment and require discriminatory disclosures of fossil fuel investments,” they wrote, “we will be forced to consider the legal areas of relief available.”
“This is fundamentally a transparency initiative,” he added. “As for the threat of litigation, bring it on.” Indeed, one would like to see even more disclosure of portfolio holdings by insurers, not less.
Do these states have a leg to stand on? It’s doubtful, since Jones doesn’t have and doesn’t assert jurisdiction over energy companies. Moreover, Jones told me that although the insurance industry groused about the initiative, no insurers challenged it in court. “They weren’t happy to be asked these questions,” he said, but they complied pretty much universally. That’s why their data are now available from Jones’ departmental website.
It’s true, as Hunter and his fellow writers observe, that insurance companies typically pursue conservative investment policies, and aren’t likely to be blindsided by the dismal prospects of fossil fuel companies. Coal companies, which received particular attention from Jones, have fallen especially sharply, however; the industry lost more than 92% of its value between April 2011 and March 2016.
It’s also true that some companies had been moving to divest fossil fuel investments even before Jones’ initiative. Allstate, which has a portfolio of about $65 billion, has pared its fossil investments by about 3% in recent years, according to the database, bringing them down to less than 14% of total assets. Investments in fossil fuel companies, including coal- and oil-fueled utilities, came to about $528 billion among the insurers subject to Jones’ oversight. That’s about 7% of their total assets of $1.7 trillion.
One mystery posed by the red states’ letter is: why now? Jones announced his initiative in January 2016 — the statements quoted above were issued on Jan. 25 last year. The database went live in January this year.
Although the attorneys general assert in their letter that they’re concerned about protecting their insurance markets (“It is our responsibility to protect the interests of those insurance companies harmed by your new initiative,” they declare), their intention really is to shield “energy companies that have a significant presence in our states” from what they call an “attempt at public shaming.”
As a subtext, they take a swipe at climate change activism characteristic of the know-nothing wing of the Republican Party and conservative movement, which is based on either claiming that climate change is a myth or that nothing that can be done by any state or national government can have much of an effect on it, or both.
They identify “the primary bases for your pessimistic prognostications” about the future of fossil fuel industries as “The Paris Agreement and the previous administration’s Clean Power Plan,” for which they have no more use than President Trump does.
Jones’ initiative dovetails with a movement away from fossil fuel investments — especially coal — by public or publicly sensitive institutions. In 2015, California mandated by law that its two major public employee pension funds, CalPERS and CalSTRS, divest from the coal industry. The University of California already had done so, as had Stanford University. In all these cases, the dividing line was not clear-cut between divestment as social expression and divestment as mandated by the economics of the disfavored industry.
That’s true of Jones’ assertion that fossil fuel holdings are uniquely perilous. Coal and petroleum may not have a bright future, but they’re not alone in facing the ravages of time and tide. But they’re in particularly bad odor among the public just now, thanks to their complicity in climate change. Jones’ initiative may fall into the category of kicking an industry when it’s down. But so what? Insurance company investors and customers alike are justified in wanting to know just how vulnerable their stocks, bonds and policies are. The fact that the fossil fuel industry needs a clutch of whining politicians to fight its battles hints that it may be in bigger trouble than we thought.