Property and casualty insurers may be the “canary in the climate risk coal mine“, but life and health insurers (“lifecos”) play a pivotal role in investing in the net zero transition. Some major Canadian lifecos are starting to acknowledge this responsibility, and opportunity. As I4PC sunsets, here are our closing reflections on the progress we have seen from parts of the sector, as well as a call for continued momentum from the lifecos, their regulators, and their institutional investors.
In Canada, the three largest players in the sector – Manulife, Sun Life, and Great-West Lifeco – manage over $3.5 trillion. Part of their business imperative is to minimize future insurance claims by supporting human health and wellbeing. To ensure policyholder payouts, they are also required to invest in low-risk, long-term assets. Compared to other asset managers, this uniquely positions lifecos to benefit from tilting their investments toward climate solutions and away from fossil fuel combustion.
To date, however, their general accounts remain skewed in the wrong direction (see our most recent analysis, Investing in a Healthy Future, Table 1). Subject to carbon-intensive portfolio companies having credible transition plans, these investments don’t just carry transition risk, they are investments in increased policyholder morbidity and mortality.
2026 Lifeco AGMs, in a nutshell
From the outset of our engagement, one of our goals has been to secure acknowledgment that ongoing fossil fuel investment presents a unique and growing risk to Canadian lifecos’ core business of insuring policyholder health and wellbeing. Adverse health impacts from air pollution and extreme weather will only intensify as long as capital flows toward the problem rather than the solutions. The recent AGMs of all three companies in early May provide a snapshot of the state of play — for some, there was a notable and positive change of tune.
For starters, the Board Chair of Manulife clearly acknowledged the link between climate change and human health on behalf of the company and board. Both Sun Life and Manulife articulated growing interest in, and investments into, researching the link between insurance claim frequency and severity and climate change. The Sun Life and Manulife CEOs also expressed interest in investing more in renewables and other low-carbon infrastructure, and noted they would consider setting investment targets to better reflect that ambition.
Despite the above, and the fact that both lifecos have announced some broad steps to tackle their general account financed emissions (e.g., Sun Life has developed an engagement strategy for their fixed income holdings, Manulife has announced it’s winding down its “legacy” general account fossil fuel holdings) the climate risk disclosures of both lifecos still lack specificity, quantification of mitigation actions, and timelines. As a result, they both fall short of credible transition plans.
Great-West Lifeco continues to avoid the question of whether it assesses climate risk in its insurance underwriting. It also has yet to articulate what steps it is taking, if any, to mitigate the substantial fossil fuel combustion exposure in its portfolio and to grow its relatively small allocation to climate solutions, such as renewables.
Finally, for the first time in our three years attending Canadian Lifeco AGMs, we witnessed a prominent Canadian institutional investor – the Canadian Medical Association – take the microphone at Sun Life’s AGM to emphasize their growing concern with the company’s ongoing investment in fossil fuels. They emphasized the health crisis for policyholders and the population-at-large resulting from fossil fuel combustion and the imperative for the lifeco to invest more in climate solutions.
Going forward, what’s still needed?
Going forward, lifecos have a clear business opportunity and responsibility to policyholders to invest in a manner aligned with wellbeing. This should be expressed by way of a specific, timebound ambition to tilt their owned assets toward climate solutions and away from fossil fuel combustion. They can look to the example set by European peer Allianz, which committed to invest at least €20 billion in climate solutions by 2030.
There is a clear role for financial regulators to ensure climate risk is better priced into lifeco investment decisions, to require credible and public transition plans, and to hold companies accountable for reporting on progress. For more details, see our final financial sector regulator report.
And there is a clear opportunity for institutional investors with long-term commitments to the sector to focus their engagement on this issue in order to ensure long-term value. Institutional investors can add much needed pressure and urgency to this issue.
The factors that have driven net zero progress at Canada’s largest lifecos – recognition of the link between climate change and health, and growing acknowledgement that they must invest more in the solutions than the problem – are only going to intensify. We encourage institutional investors, financial sector regulators, and the companies themselves to carry this work forward.
