California’s Coal Divestment Initiative Puts Politics before Good Policy
WASHINGTON (July 26, 2016) –The California Department of Insurance’s recently announced “Climate Risk Carbon Initiative,” which calls for insurers who operate in the state to divest “voluntarily” from coal-related investments, is an example of what happens when electoral considerations are injected into ostensibly nonpartisan policies, according to a new policy study by R Street Western Region Director Steven Greenhut.
The ostensibly “voluntary” nature of the initiative from is belied by Insurance Commissioner Dave Jones’ threat to publicize the names of the companies that don’t comply, Greenhut notes.
“An obvious question is raised as to whether this prescription really is about assuring the solvency of some of the most stable and conservative companies in the nation, or whether it serves primarily as an opportunity for an ambitious politician to champion a high-profile issue for long-term political gain,” Greenhut writes.
Data from S&P Global Market Intelligence offers little justification for concerns over insurance companies’ level of investment in coal-related firms. Among life insurers that do any business in California, the fair value of the sector’s holdings in coal-related firms accounted for just 0.94 percent of their total assets. Among property/casualty companies operating in the state, the investments account for just 0.41 percent of total assets.
Unfortunately, due to fear of retribution from the same commissioner who handles matters like rate-hike requests, insurers have few avenues to challenge even those decisions that are clearly intended to be career-making, rather than in the best interest of those impacted.
“There’s no legitimate role for an insurance commissioner, or any regulator, to pick and choose which investments private companies should be allowed to make based solely on the latest political winds,” Greenhut concludes. “Firms investing their own money and concerned about their own financial future tend to make better decisions than government planners with a different set of motives. It’s best to let the market sort things out.”
