The business models of life insurance companies depend on their policyholders living healthy, long lives, and yet their investment strategies tell a different story. Despite having made net-zero promises, these insurers continue to invest heavily in fossil fuels, and insufficiently in cleaner energy sources, directly undermining the health outcomes they aim to protect.
Our most recent reporting reveals a contradiction in the investing practices of Canada’s largest life and health insurers – Manulife, Sun Life, and Great-West Lifeco. This disconnect is a financial and reputational liability. At a time when the science is unequivocal about the harm caused by fossil fuel combustion – from deadly air pollution to worsening wildfires – Canada’s life insurance companies remain out of step with both health science and global expectations for climate-aligned investing.
Fossil fuels directly threaten the people insurers protect
Fossil fuels are not an abstract threat to human health. Their combustion is responsible for millions of premature deaths every year. Air pollution is one of the world’s leading killers, contributing to respiratory disease, cardiovascular conditions and higher mortality from heat and wildfire smoke. Wildfire smoke, now an annual feature of Canadian summers, is up to 10 times more toxic than pollution from burning fossil fuels. One five-day period of wildfire smoke in Ontario in 2023 alone cost more than a billion dollars in healthcare impacts.
Last month saw air pollution caused by fossil fuel combustion in New Delhi reach record highs. Notably, Sun Life and Manulife are expanding their life insurance business in India and across Asia. Delhi’s air quality index maxed out at 500 – 50 is the limit recommended by the World Health Organization. Air quality indexes showed that actual data reached 850. People were warned not to go outside. Hospitals were filled with people struggling to breathe.
For life and health insurers, the implications are direct. Rising illness and mortality drive claims. Climate-fuelled disasters increase volatility and undermine long-term actuarial assumptions. Every dollar invested in fossil fuels is a dollar invested in future morbidity – and future costs.
A gap between pledges and practice
Yet despite this, Canada’s major insurers are lagging in redirecting their general account capital toward solutions good for both health and the climate. BloombergNEF shows that financial institutions should be targeting a low-carbon to fossil-fuel investment ratio of at least 4.8:1 by 2030 if they wish to align their portfolios with a 1.5°C warming future.
According to our recent analysis, based partly on estimates, none are close. Manulife is estimated at 2:1 – ahead of peers, but still far from alignment. Sun Life sits near parity at 0.9:1. Great-West Lifeco is furthest behind at 0.28:1. These ratios reveal that, to date, all three insurers are not yet aligning their investments in the clean-energy future they believe is both necessary and inevitable.
More troubling, none have yet set quantitative targets to increase renewable-energy or climate-solution investments in their general accounts – the portfolios used to protect policyholder liabilities. Manulife and Sun Life don’t fully disclose their fossil fuel exposure, forcing analysts to estimate their holdings.
Meanwhile, European peers AXA and Allianz and Canadian peers RBC and the Co-operators have moved toward clearer “climate solutions,” “low-carbon solutions” or “renewable energy” investment or lending targets that increase credibility and reduce the risk of greenwashing.
The business case for climate-healthy portfolios
Life insurance companies invest their client premiums so they can pay out future claims, which can sometimes be decades in the future. These long-duration insurance liabilities are perfectly suited to corresponding stable, long-term investments in renewable energy, clean infrastructure and climate-resilient assets. These investments reduce exposure to volatile fossil fuel markets and support healthier environments and healthier populations.
Insurers should be natural leaders in health and climate-solution financing. Leading medical institutions, including the Canadian Medical Association and the World Health Organization, describe fossil fuel financing as a direct threat to public health.
Three things insurers can do now
To realign their portfolios with their purpose and reduce risk, Canada’s life insurance companies can take three immediate steps.
- Bring transparency to the numbers
Insurers can disclose clear, comparable data on fossil fuel exposure and renewable-energy investments within their general accounts. Without transparency, neither policyholders nor markets can assess credibility or progress.
- Set clear investment targets
Life insurance companies need explicit, quantitative goals – whether framed as targets, envelopes or sleeves – for increasing their exposure to renewable energy and climate solutions. Vague “sustainable finance” labels are no longer enough. Real impact requires real numbers.
- Integrate climate and health science into underwriting
If air pollution, wildfire smoke and extreme heat are driving mortality and morbidity, insurers should reflect that reality in their actuarial models and disclosures. Failing to account for these rising health risks leaves a critical gap.
Finally, insurers can use their influence to advocate for policy reforms that better align financial incentives with health and climate goals. If markets undervalue climate solutions today, life insurance companies – given their expertise – are well placed to help correct that.
Kyra Bell-Pasht is the director of research and policy at Investors for Paris Compliance.
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