American International Group
From WikiClimate
Company Details
- Company name: American International Group
- Country: USA
- Sub Sector: Insurance - N. America
- Industry Group: Insurance
- Parent Sector: Financials
According to its website, American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.
Carbon Disclosure
The following data is © Carbon Disclosure Project and was provided by AIG in response to the Carbon Disclosure Project Greenhouse Gas Emissions questionnaires.
Regulatory risks
We do not consider our company to be exposed to regulatory risks because AIG’s operations generate a very small amount of direct GHG emissions, and these emissions are unlikely to be regulated.
However, AIG’s airplane leasing company the International Lease Finance Corporation might be directly affected by regulation of GHG emissions from aviation. Many of AIG’s insurance customers, which include major GHG emitters across all sectors, will be impacted. Regulatory risk associated with climate change is a consideration in investment decisions and affects some of the companies in which AIG invests.
Physical risks
We consider our company to be exposed to physical risks because we have facilities and assets that will likely be exposed to climate change and we insure many of our customers for physical risks.
The potential impacts of climate change, both near and longer term, such as continued temperature rise, change in precipitation patterns, loss of snow pack and mountain glaciers, sea level rise, increased pest infestation, drought, flood, wildfires and other increased weather disturbance activity, pose risks of damage to buildings and infrastructure, to forests and other eco-systems, to food production, to water resources and to human health. In turn, these potential consequences could result in far-reaching negative impacts on economies, businesses and societies worldwide.
These could result in changes in traditional property/casualty underwriting. The risk of increased frequency or severity of catastrophic events also could impact AIG’s facilities and operations worldwide. For example, in the U.S. in 2005, AIG suffered physical damage from weather-related events, primarily the result of Hurricane Katrina, to its owned and leased office buildings that it uses for its business operations. As an insurer, AIG had after tax catastrophe losses in 2005 of $2.11 billion primarily related to Hurricanes Katrina, Rita and Wilma. Some of AIG’s assets face risks from weather changes, such as the Stowe, Vermont, ski resort owned by AIG which depends on snow accumulation, and real estate assets in areas prone to weather-related catastrophes.
General risks
We do not consider our company to be exposed to general risks because, while limits on GHG emissions are likely to increase the price of electricity and commercial airline travel, the main component sources in AIG’s GHG emission inventory, AIG’s expenditures on these services are quite small relative to income and operating expenses. For example we estimate that electricity costs globally are roughly one tenth of one percent of gross revenues.
Other than the regulatory risks and physical risks outlined above, we do not feel that AIG will face other kinds of risks related to climate change, for example reputational risks -- such as customer attitude and demand -- do not seem to apply since AIG is not a direct emitter and we are proactive in promoting climate change solutions in our own operations and through our core business products.
General and regulatory risks management
In response to the risks associated with climate change, we have expanded business offerings and investments that help our customers and others reduce GHG emissions; advocated for legislation and regulation in the U.S. and internationally to limit GHG emissions and promote a global carbon market; funded research and dialogues related to incorporating climate change risk into catastrophe modeling and to promoting policies to help coastal communities adapt to severe weather occurrences; and continued adjusting for climate related risk in ongoing underwriting practices. We have made a commitment to offsetting our GHG emissions with verified emissions reductions and are in the process of implementing a “Be Green” plan to engage employees in initiatives to reduce the environmental footprint of AIG’s global business operation, including reduction of GHG emissions.
For a discussion of the products and services AIG is developing to help its customers transition to a low carbon economy see below.
Regarding advocacy for legislation and regulations to limit GHG emissions and promote a global carbon market, in April 2007, AIG became the first insurer to join the United States Climate Action Partnership (USCAP), an alliance of major businesses and leading climate and environmental groups that have come together to call on the federal government to enact promptly legislation requiring reductions of greenhouse gas emissions. The USCAP partners have presented a proposal entitled A Call to Action (attached), which calls for a mandatory economy-wide, market-driven approach to climate protection. In accordance with USCAP, AIG supports federal legislation to cap economy-wide greenhouse gas emissions in the United States, coupled with an emissions trading system to cover as many emissions as is administratively and politically possible.
In Europe and elsewhere, AIG participates in advocacy efforts of the Corporate Leaders’ Group, the Association of British Insurers’ Climate Wise, Combat Climate Change (3-C) and the International Emissions Trading Association. The Corporate Leaders Group, affiliated with the University of Cambridge Programme for Industry and the Prince of Wales Business and Environment Programme, offers support to EU government leaders in finding ways business can help to meet GHG emission reduction targets.
We are members of the Steering Committee for the CEO statement on international climate change policy, prepared under the auspices of the World Economic Forum and the World Business Council on Sustainable Development (WBCSD), to be presented to world leaders at the G-8 summit in Japan in July 2008. We also participate in a business advisory group to the Carbon Disclosure Standards Board. We are members of the WBCSD, the World Resources Institute Corporate Council and the Forest Carbon Dialogue, a coalition of companies and NGOs advocating for the crediting of avoided deforestation forest carbon in the international carbon market.
Regarding climate change risk management research and dialogues, both internally and externally, that relate to AIG’s business activities and managing business risks through our on-going underwriting methodologies please see below.
To manage internal climate change risks, we have undertaken, ""Be Green,"" a global initiative to engage employees and reduce the environmental impact of our operations. AIG’s overall internal plan is to mitigate—through offsets, energy efficiency and purchases of renewable energy—the greenhouse gas impact of its global business operations, as well as to reduce other aspects of its environmental footprint.
Be Green lays out more than 30 specific initiatives to reduce the company's consumption of electricity, paper, water and other natural resources, to improve recycling efforts, to purchase more eco-friendly products and to encourage employees to reduce their environmental impacts. A majority of the initiatives in Be Green are related to energy use (primarily electricity), including: the temperature will be adjusted in AIG offices by one or two degrees warmer in the cooling season and cooler in the heating season, new construction and renovations of AIG offices will follow strong environmental standards, such as LEED, Energy Star, BREAM or the Green Building Initiative, new purchased IT equipment for individual or shared use will be Energy Star-compliant, and power management states on PCs and monitors will be set to reduce power use during extended idle time.
In addition to the initiatives outlined above to reduce AIG's consumption of energy, paper, water, and waste and improve recycling, a key goal of Be Green to is to educate our 116,000 employees worldwide about climate change and ways that each employee can reduce his/her environmental impact. We have launched an Intranet site and a communication plan to reach employees. In the U.S. we have established a network of volunteer employee “Green Ambassadors” to implement the Be Green plan. We are in the process of developing similar networks outside the U.S.
In order to collect and monitor the environmental impacts of our operations and provide data needed for Be Green, we have recently completed our second GHG emissions inventory. Details are provided below.
We have made a commitment to purchase offsets (verified emissions reductions or VERs) to compensate for the emissions identified in our GHG emissions. We have completed funding for projects in China and the US that will reduce or sequester GHG emissions for our 2006 emissions and are in the process of identifying offsets for 2007. The 2006 projects are agricultural or land-use projects that will generate more than 620,000 metric tons of CO2 offset credits –the GHG emissions attributable to AIG’s 2006 global operations. The projects in China are located in the Xinjiang and Sichuan provinces, are being developed by Environmental Defense Fund, and will be supported and assessed by EcoLogic, and registered in the China Beijing Equity Exchange. The US projects include reforestation in the Mississippi Delta, improved forest management in California, and conversion of marginal cropland to grasslands out west, and will be registered and retired in the ERT/Winrock GHG Registry or the California Climate Change Action Registry.
Beginning in 2008 we expect to purchase Renewable Energy Certificates (RECs) as an offset for 10% of our total worldwide energy consumption.
AIG’s climate change activities are communicated through continued response to the annual CDP questionnaire and through the environment and climate change section of the corporate responsibility website, which is intended to be used as an educational and communication tool, both externally and internally. The environment and climate change section of this website can be accessed at www.aigcorporate.com by clicking on “Corporate Responsibility” and then “Environment.”
Current and/or future financial effects of risks
AIG factors in changes in climate and weather patterns as an integral part of its underwriting process -- a systematic approach to measuring weather risk that includes, among other methods, sophisticated catastrophe exposure modeling. AIG manages its insurance exposures by changing rates and/or limiting coverage based on measuring weather risk through this approach. Thus increased weather related risks could lead to higher rates and limited coverage.
The underwriting process constantly recalculates and revalues risks for our clients, and adjusts coverages and rates accordingly, while simultaneously managing our exposures. We do this to provide the best possible risk management services to our clients while protecting long-term shareholder value. Perhaps no other industry responds as quickly to changes in climate patterns as the insurance industry.
AIG, along with Lloyd's, is a primary sponsor of a project to assess how to incorporate climate change risk into catastrophe modeling. We have held two CAT Modeling Forums: Changing Climatic Dynamics and Catastrophe Model Projections with climate change scientists, CAT modelers, and insurance industry companies. The forums are convened by the Center for Health and the Global Environment at Harvard Medical School and the Insurance Information Institute. The Office of Environment and Climate Change and AIG Global Reinsurance Division are the principle AIG offices involved in helping organize the forum. In addition to AIG and Lloyd's, financial support is provided by ACE Ltd., Allstate, Guy Carpenter, Marsh Inc., Munich Re and Travelers.
Fifteen of the leading climate scientists in the world were in attendance at the first forum held in October 2007, along with representatives from three of the leading CAT modeling companies and several insurance, reinsurance and brokerage companies. The scientists presented on the various perils that impact insurance companies: tropical cyclones, tornadoes, severe thunderstorms, flooding and droughts, heat waves and forest fires. They discussed ways in which climate change is currently affecting the frequency and severity of these perils and how this may be built into the CAT models. The forum re-convened in June 2008.
A summary report from the first session is attached. Also the presentations given at the first session can be accessed from the Insurance Information Institute's website: [1].
AIG also participates on an advisory board and has provided funding for a research project of the H. John Heinz III Center for Science, Economics and the Environment and Ceres entitled "Resilient Coasts: Reducing Risks and Adapting to Climate Change."
This project seeks to develop a model for coastal community resilience in light of more intense hurricanes and other climate disturbances. The project plans to produce recommendations defining a new vision of coastal development aimed at federal, state, and local governments, as well as the private sector. The goal is to create a more viable and sustaining approach to the use of coastal areas that strikes a healthy balance among economic, social, and environmental needs, while reducing the vulnerability of populations to natural disasters.
In 2006, AIG Investments adopted a sustainability policy that states "AIG Investments believes that the consideration of sustainability must be an integral part of the analysis and management of investment portfolios. The long-term economic viability of business and investments can be greatly impacted by the risks and opportunities related to the physical and social environment in which we operate." AIG Investments is continuing its multi-phased process of enhancing the already established environmental and climate related criteria, where appropriate, for all asset classes -- Alternatives, Fixed Income, Equities, and Real Estate, and has made organizational and process changes to support the integration of environmental risk and opportunities assessment.
Opportunities presented by current or anticipated regulatory requirements on climate change
Many GHG regulatory programs provide business opportunities for AIG. For example GHG emissions trading markets and GHG reduction mandates, created by government regulations, and the resulting increased value for GHG reductions, renewable energy portfolio standards, and requirements regarding bio-fuels all provide business opportunities for investment, insurance and financial products.
Given the scope of its business activities, AIG’s commercial opportunities related to climate change lie in:
(1) An investment strategy that takes advantage of the financial value deriving from GHG emissions reductions and the global demand for GHG emission reductions, for example investments in low emitting technologies, energy efficiency, sustainable forestry and carbon finance;
(2) Development of new and customized insurance products and services, and expansion and marketing of existing ones, that facilitate GHG emissions reductions for our clients, for example through insurance for low emitting technologies, renewable energy and energy efficiency;
(3) Development of other “green” insurance products and marketing strategies;
(4) Financial products and services that support the emerging market for GHG emissions trading, such as direct involvement in emissions trading and providing risk intermediation products and derivative products for carbon credit transactions;
(5) Consulting services, both external and internal, to support clients in managing their GHG emissions and to support AIG businesses in providing climate change related products and services.
Opportunities presented by current or anticipated physical changes resulting from climate change
Current or anticipated physical changes may impact AIG’s underwriting methodologies but do not at present see resulting opportunities for AIG.
General opportunities presented by climate change
A brochure was published in December 2007 and covers many of the new products and services introduced by AIG to help our clients address climate change and to support the carbon market. Specific examples of products described on the brochure or introduced since include:
Insurance:
AIG Global Marine and Energy has formed the Advanced Energy Solutions Group. This Group services the insurance, risk management and loss control needs of U.S.-based alternative energy clients, including companies engaged in bio-fuel, hydroelectric, geothermal, solar, and wind operations.
The AIG ecoPractice provides a host of general insurance products and services across multiple AIG product lines and segments including Alternative Energy, Commercial Lines, Personal Lines and Accident & Health, to AIG clients outside the U.S.
Several insurance divisions are designing new products to support the carbon market, encourage emissions reductions and/or provide educational materials to customers as part of green marketing. For example, AIG's Lexington Insurance Company has introduced Upgrade To Green (see attached press release) which enables commercial and residential property insurance policyholders to rebuild or repair their damaged property to recognized “green” standards after a covered loss. The Sustain-a-Build Initiative (see attached press release) enables AIG Environmental customers to receive discounts of up to 10 percent on premiums for new PLL policies for properties certified under the U.S. Green Building Council's LEED green building rating system. And Risk Finance is designing a product to insure against the failure of a project to generate tradable carbon reductions. In addition, the AIG companies have almost three decades of experience in the areas of environmental remediation and environmental liability insurance.
Financial Products:
AIG’s Capital Markets operations have the capability to participate in GHG trading of compliance instruments within the European Union’s emissions trading system. A business plan is being prepared for more active participation in the carbon market, including development of risk management/derivative products to support the carbon market, serving as an intermediary for risk transfer, and providing brokerage and GHG management services to AIG companies’ clients.
AIG Financial Products Corp. participated as credit support provider in a large transaction under the World Bank's Umbrella Carbon Facility involving the purchase of Certified Emissions Reductions (CERs) from two Chinese manufacturing companies by a consortium of companies from developed countries.
Consulting:
AIG, through its subsidiary, HSB Solomon Associates, LLC, provides an approach to drive energy improvements in the refining, petrochemical and power sectors through performance benchmarking, best practice reviews, action plan development, and implementation support. It is actively marketing to clients a program to identify energy efficiency improvements that translate directly into carbon reductions, including supporting the registration process for CDM and JI projects and exploring funding options. Solomon has consulted with governments on allocation methodologies for new entrants in emissions trading schemes.
AIG Consultants, Inc. is pursuing additional consulting opportunities to provide technical support to rating agencies, project developers and other relevant businesses in reviewing various projects that generate tradable carbon credits for the carbon market. Both Solomon Associates and AIG Consultants support AIG’s insurance and investment activities through technical assessments of low carbon technologies.
AIG is actively promoting awareness of climate change with clients and internally. In October 2007 AIG hosted an “International Forum on Climate Change: China's Business and Policy Challenges” attended by 200 people representing AIG's major commercial customers in China, international businesses, the Chinese government, academic institutions and non-governmental groups. AIG hosted an Executive Green Forum in November 2007 to learn how AIG business units can embrace climate change solutions in products and services. AIG Investments and the Office of Environment and Climate Change hosted a Climate Change Forum in New York attended by more than 100 AIG colleagues worldwide, and AIG-UK convened a seminar in London for forty of its clients to advance the discussion and understanding of the scientific, economic and business perspectives of climate change. In May 2008 AIG ecoPractice hosted a Climate Change discussion to discuss the impacts and opportunities that climate change presents to the insurance industry. AIG sponsors an ongoing internal climate change forum usually with outside speakers, however in 2008 at one of these forums, top AIG executives spoke about climate change as a “Deliver the Firm” issue and discussed climate change solution business opportunities.
AIG has participated and/or will participate in other meetings and conferences presenting on the issue of climate change and emissions trading including Environmental and Carbon Finance, various renewable energy and carbon market conferences, RIMS conferences, the Carbon Disclosure Project, CERES and others.
Planned investment in products and services designed to minimise/adapt to effects of climate change
In 2006, AIG Investments adopted a sustainability policy that states "AIG Investments believes that the consideration of sustainability must be an integral part of the analysis and management of investment portfolios. The long-term economic viability of business and investments can be greatly impacted by the risks and opportunities related to the physical and social environment in which we operate." AIG Investments is continuing its multi-phased process of enhancing the already established environmental and climate related criteria, where appropriate, for all asset classes -- Alternatives, Fixed Income, Equities, and Real Estate, and has made organizational and process changes to support the integration of environmental risk and opportunities assessment.
Responsible Investments range from fixed income renewable energy project finance investments of more than $650 million in hydropower, wind, solar, thermal, and transmission projects, to private equity investments in infrastructure funds in Asia, Latin America and Europe, to direct investment in a developer of GHG abatement projects. A Sustainable Investment Team is evaluating deals in the 5-40 million euro deal size for additional private equity.
AIG Capital Partners, Inc. has become an investor in London-based Sindicatum Carbon Capital Ltd, a principal financier/developer of GHG abatement projects globally, and AIG Financial Products Corp. is an equity provider and part owner of a 18-megawatt solar plant in Spain.
AIG Investments’ global real estate division invests in the development and acquisition of buildings that conform to the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) standards or equivalent local standards that emphasize cutting-edge efficiency and clean energy technologies. AIG companies have developed award-winning projects such as Spruce Peak at the Stowe Mountain Resort in Vermont, the Atlantic Station conversion of a brownfield site in Atlanta, Georgia, to a large office-retail-residential complex and “green” office buildings in Zurich, London, Dublin, Puerto Rico, Manila and Hong Kong.
AIG Investments is an institutional investor signatory to the request for information on the fourth, fifth and sixth Carbon Disclosure Projects (CDP), and sponsored the New York launch of the CDP reports in 2006 and 2007. In 2006, AIG Investments joined the Investor Network on Climate Risk, a network of institutional investors and financial institutions focused on the financial risks and investment opportunities posed by climate change. Since 2007, AIG Investments has been a member of the UNEP-Finance Initiative Asset Management Working Group.
AIG Investments is continually evaluating the development of new investment products that include climate change and other environmental criteria. AIG Investments, together with JF Asset Management, launched the first Green Fund in the Hong Kong Mandatory Provident Fund Market to invest in environmentally friendly companies.
Future financial effects of opportunities presented by climate change
As an integral part of AIG's product development process, we complete cost/benefit analyses to determine a potential product's premium and profitability.
While some of the initiatives introduced internally as part of Be Green will require upfront cost or investment, in general we expect to see significant cost savings resulting from a decrease in energy, paper, and other resources.
Greenhouse Gas Emissions
- Greenhouse Gas emissions methodology used: GHG Protocol
Calculations were completed by ICF International, following GHG Protocol.
- Accounting year: 01/01/2007 to 31/12/2007
- Total global Scope 1 activity in Metric Tonnes CO2-e emitted: 75,040
- Total global Scope 2 activity in metric tonnes CO2-e emitted: 420,319
