Liberty Mutual Transition Principles & Coal Policy

Insurers help people and companies understand and mitigate risks through identification, mitigation, and transfer. The Property & Casualty industry plays a key role in the growth and stability of our economic system, building resilience for customers and communities, and investing our capital as a force for good. This puts property and casualty insurers in a unique position to support individuals, businesses and communities by advancing the global climate transition to a low-carbon economy and fostering climate resiliency.

At Liberty Mutual, we take a system-level pragmatic approach to understanding the climate transition - one that identifies the external factors that are beyond a company's control, such as policy changes, adoption and scaling up of renewable and decarbonization technologies, and changing market or customer preferences. Our climate strategy and transition principles are based on research derived from this approach, which is complemented with insights from portfolio-specific analysis. Through our analysis, we found that the pace of a country's transition will depend on its readiness to increase low-carbon alternatives in their energy mix as well as their ability to establish clear climate transition policies supported by government action.

Our climate transition principles are:

1. We are committed to transitioning to a low-carbon economy and believe it is a once in a generation opportunity that requires a nuanced approach - one that aligns with a company's purpose and does not create additional transition risk for the economy and society.
2. We understand that transitioning to a low-carbon economy is complex with several different transition pathways. We recognize that governments are adopting policies suitable to supporting the transition of their societies and economies.
3. We believe that a systems-level, pragmatic approach to transition planning is needed when building transition plans and policies, and that these plans / policies need to be updated periodically.
4. We think that transition pathways and plans need to consider activities focused on mitigation (emissions reductions), adaptation (resiliency), and energy efficiencies to move to a low-carbon economy.
5. We support inter-governmental coordination, public-private collaboration and private sector partnerships to enable the climate transition.

Our research, based on analysis of third-party data shows that several economies do not have clear climate policies as yet. Our coal policy reflects this reality and aims to support companies through their transition journey by facilitating the adoption of greener technologies or the increase of renewable energy sources in their mix.

Liberty Mutual

• Does not accept underwriting risk for companies where more than 25 percent of their revenue[1]arises from thermal coal mining.
• Does not accept underwriting risk for companies where more than 25 percent of their production relates to energy generation from thermal coal.
• Does not make direct investments in debt or equity securities of companies that generate more than 25 percent of i) revenues from thermal coal mining or ii) electricity production arising from thermal coal.

Exceptions

1. Liberty Mutual supports the transition to a low-carbon economy and we may support:
   • Renewable energy or decarbonization projects pursued by a company exceeding the policy threshold.
   • Projects and/or activities that support the decommissioning and/or repurposing of a thermal coal power plant.
2. Liberty Mutual will continue to support the needs of communities with insurance and surety products that serve to protect workers and the environment. For this reason, we may support:
   • Worker compensation related policies at companies that generate energy from thermal coal.
   • Reclamation bonds, a type of bond that ensures land disturbed by mining operations is restored to its original state or to the condition specified in the contract, once the mine is closed or it reaches the end of its useful life.

Revision of the policy

This policy will be reviewed and updated every five years or sooner if we observe significant shifts in the pace of the transition based on our analysis.

[1]In specific cases, Liberty may use Mt of coal

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