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ClientEarth Communications

5th May 2019

Rule of law
Climate finance
Fossil fuels

Lawyers warn Lloyd’s over legal risks of underwriting contested Carmichael coal mine

Climate finance lawyers at ClientEarth have put Lloyd’s of London on notice of legal and financial risks associated with Adani’s notorious Carmichael coal mine. The letter, addressed to the specialist insurance market’s CEO, was prompted by the group’s failure to rule out underwriting the controversial project.

ClientEarth climate finance lawyer Stephanie Morton, author of the letter, said: “It is difficult to see how an insurer could justify underwriting the Carmichael coal mine. The project is crawling with financial, environmental and reputational risk – and is strongly contested both locally and internationally. Banks are keeping well away from Carmichael and, logically, so should insurers.

“Many insurers acknowledge that climate change poses an existential threat to the sector. Coal is the single largest contributor to climate change. The irony is that by enabling new coal projects, insurers are undermining their own viability. It is a stark case of climate hypocrisy.

“Insurers are legally required to have an effective risk-management system. How can you claim to have an effective risk-management system when you are sabotaging your own prospects?”

Lloyd’s announced it would implement a ‘coal exclusion policy’ last year, which would detail red lines around investing in coal – but never made the criteria publicly available.

ClientEarth has previously highlighted that the policy would not, in any event, apply to 97.5% of Lloyd’s capital, which remains exposed to coal-related risks. Importantly, the policy would also not prevent Lloyd’s syndicates from continuing to underwrite environmentally toxic coal projects.

Morton added: “It may have taken a stance on coal investment, but if Lloyd's is still underwriting coal, it's still enabling it, and that comes with considerable risk.”

ClientEarth’s lawyers are calling on Lloyd’s to publicly confirm the criteria and implementation of its coal exclusion policy, the steps it is taking to manage coal-related risks, and its position on the underwriting of the Carmichael coal mine by its syndicates.

The Institute for Energy Economics & Financial Analysis (IEEFA) has conducted extensive financial analysis of the Carmichael coal mine.