The United Nations previously created something called the Net-Zero Insurance Alliance in an effort to somehow bring the insurance industry in line with the UN’s climate change policies. If you find yourself wondering what insurance companies have to do with carbon emissions, you’re not alone, but this is 2023 so here we are. The arrangement requires all participating companies to include environmental, social, and governance considerations (ESG) in their charters. The NZIA may be falling apart, however. An increasing number of American red states have passed laws forbidding ESG requirements that could raise costs and reduce investment profitability. Further, 23 Republican state Attorneys General sent letters to NZIA members suggesting that they could be violating antitrust laws. This has led to multiple European insurance companies pulling out of the group, much to the UN’s consternation. (Politico)

Foreign-based insurers are getting a taste of the anti-ESG medicine that Republican policymakers have been serving to U.S. financial firms, and they’re clearly not enjoying it.

European insurers are pulling out of the UN-convened Net-Zero Insurance Alliance over concerns that red states’ antitrust allegations could hurt their businesses. Bloomberg reported Wednesday that the group was holding a meeting to discuss recent departures, a week after 23 Republican attorneys general sent letters to members of the group raising antitrust concerns.

The UN is pushing back.

The United Nations is protesting this development, claiming that the alliance is needed “to successfully tackle the climate emergency.” But the bottom line is that the NZIA is acting as a blackmail squad. Given a choice between whatever business these companies have with the UN and the potential loss of a significant portion of the American market, this wasn’t a tough call to make.

The insurance industry is much the same as the capital investment industry in this regard. They have a responsibility to their shareholders to conduct their business in a way that minimizes risks while maximizing opportunities for profitability. Those decisions are made using market data that is constantly monitored and how much their activities “contribute to decarbonization” is not a factor. And the UN thankfully still doesn’t have any authority to mandate its decisions to private industry actors.

But it’s not just at the UN or around the European Union where ESG is taking a hit. This month, Texas is becoming the latest state to bar insurers from including ESG considerations when setting rates. Other red states are following suit. The private equity world is clearly paying attention. As the linked report notes, during its annual shareholders’ meeting this week, investment giant BlackRock voted against a resolution that would have embedded “decarbonization considerations” into its investment strategy. The company’s CEO pointed out that they are in business to maximize their clients’ investment strategies.

In a way, this is all happening in an organic fashion in terms of normal capitalist practices. You don’t need any sort of sweeping federal regulations or an international treaty to do away with ESG. You just have to make it less affordable and demonstrate the diminishing returns realized by companies who toe the line of the environmentalists. Both investors and insurance policyholders are smart enough to realize that when they are seeing smaller returns and more expensive payments based solely on some abstract climate equation, it’s time to move on and find a more responsible company.

Unfortunately, the federal government still holds far too much regulatory power. The current administration is festooning all manner of regulations with carbon considerations. That pattern can only be changed at the ballot box, so that’s what we need to focus on doing next year.