Chubb and Travelers aim to exclude climate change proposals

Chubb and The Travelers Companies are asking the SEC for the green light to exclude shareholder proposals relating to their financing activities and climate change. The proposals reflect a focus among some investors and shareholder groups on the underwriting activities of major insurance companies in terms of fossil fuel projects.

One proposal filed ahead of Chubb’s 2023 AGM by As You Sow asks that the insurer issue a report ‘disclosing 1.5[°C]-aligned medium and long-term [greenhouse gas (GHG)] targets for its underwriting, insuring and investment activities.’

It recommends that the report disclose, at management’s discretion, a timeline over which Chubb will measure the emissions of its highest-emitting industry sectors and set targets for those sectors that are aligned with the Paris Climate Accord goal of limiting temperature increase to 1.5°C.

‘The insurance industry is under increasing pressure to address its contributions to climate change,’ As You Sow writes in materials with the proposal. ‘The United Nations Environment Program Finance Initiative has underscored the critical role of insurance companies in meeting the 1.5[°C] goal. Exemplifying this growing pressure, legislation was passed in Connecticut requiring regulators to incorporate emissions reduction targets in their supervision of insurers.’

The group states that shareholders are worried Chubb is not sufficiently reducing the climate footprint of its insurance-related activities. It calls Chubb ‘a climate laggard in the global insurance sector’, stating that 29 global insurance companies have joined the UN’s Net-Zero Insurance Alliance, committing to transition emissions from their insurance and reinsurance underwriting portfolios to net-zero by 2050.

‘By setting and disclosing medium and long-term GHG emissions reduction targets across its underwriting, insuring and investment activities, including net-zero ambitions, Chubb can assure investors that management is addressing its quickly growing climate risk, reducing its climate impact and building on climate-related opportunities,’ As You Sow writes.

The group has filed a similar proposal with Travelers requesting that the company ‘issue a report addressing if and how it intends to measure, disclose and reduce the [GHG] associated with its underwriting, insuring and investment activities, in alignment with the Paris Agreement’s 1.5[°C] goal, requiring net-zero emissions.’ Last year, almost three quarters (72.2 percent) of votes cast at Chubb’s AGM were in support of a proposal from As You Sow with almost identical phrasing.

Separately, Green Century Capital Management has filed a proposal ahead of this year’s proxy season asking that Chubb’s board ‘adopt and disclose a policy for the timebound phase-out of Chubb’s underwriting risks associated with new fossil fuel exploration and development projects, aligned with the [Intergovernmental Panel on Climate Change’s (IPCC)] recommendation to limit global temperature rise to [1.5°C].’

Green Century says investors are concerned that despite Chubb’s public support for transitioning to a net-zero economy, the company’s efforts are not sufficiently aligned with the IPCC’s ‘pathways’. According to the firm, it has filed similar proposals with The Hartford and Travelers asking them to stop underwriting new fossil fuel projects. 
 

CHUBB’S RESPONSE
Chubb is requesting no-action relief if it omits As You Sow’s proposal under Rule 14a-8(i)(7), arguing that the resolution seeks to micromanage the company ‘by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment, dictating the particular method for the company to align its activities with achievement of the [1.5°C] by 2050 goal.’

It also argues that the proposal has been ‘substantially implemented’. Chubb writes that it ‘has already taken significant actions and made public disclosures regarding its strategy and approach for aligning its underwriting, insuring and investment activities with the [1.5°C GHG] emission targets of the Paris Agreement, which is the underlying concern and essential objective of the proposal.’

Similarly, Chubb argues that Green Century’s proposal may be properly excluded from its proxy materials because it seeks to micromanage the company by ‘probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment, dictating a particular method – a categorical underwriting prohibition on all new fossil fuel projects – for the company to align its activities to limit global temperature rise to [1.5°C].’

Again, it also argues that the proposal has been substantially implemented: ‘Chubb has already taken and publicly disclosed its significant actions to align the strategy, approach and policies of its underwriting practices, including with respect to the fossil fuel industry, with this goal.’


TRAVELERS’ RESPONSE
Travelers argues that the As You Sow proposal it received can be properly omitted on the grounds that it has already been substantially implemented and deals with matters relating to the company’s ordinary business operations.

The company notes that the proposal seeks a report on ‘if and how’ Travelers intends to measure, disclose and reduce certain GHG emissions but that Travelers has ‘publicly and unequivocally’ stated that at present it (i) ‘cannot accurately calculate the total emissions of our customers and [is] therefore unable to disclose the emissions, or establish any emissions reduction targets, with respect to our underwriting portfolio’ and (ii) ‘cannot accurately calculate the total emissions of [its] investment portfolio and [is] therefore unable to disclose the emissions, or establish any emissions reduction targets, with respect to [its] portfolio.’

In making this statement, Travelers argues, it has answered the proposal’s question as to if it will measure, disclose and reduce the emissions at issue.

In addition, the proposal ‘plainly, undeniably and impermissibly seeks to micromanage the company by dictating that Travelers must modify its activities to reduce its GHG emissions in complete alignment with the Paris Agreement’s 1.5[°C] goal,’ the company says.

At the time of writing there is no indication on the SEC’s website that Travelers or The Hartford have filed 14a-8 no-action requests regarding the Green Century proposals.

A spokesperson for Travelers declined to comment. A spokesperson for The Hartford did not have an immediate comment and a request for comment from Chubb was not returned immediately.

The companies’ 2022 AGMs took place on May 19, May 25 and May 18, respectively.