The global insurance industry is failing to keep pace with pension funds in protecting its portfolios from climate risk, leaving trillions of dollars exposed and threatening financial stability, according to research.
Carried out by the Asset Owners Disclosure Project (AODP), the analysis covers 116 insurers worldwide with $15.3tr (£11.6tr) under management, comparing them to 324 pension funds with $15.9tr (£12.1tr) of investments.
The study found that 1% of insurers are assessing the risk of stranded assets in their investment, while 6% of pension funds are doing so in their portfolios.
Only 5% of insurers across the world are measuring portfolio carbon emissions, compared with 13% of pension funds.
Fewer than one in 10 (8%) of insurance firms have staff dedicated to integrating climate risk into the investment process as opposed to 16% of pension funds.
The study further revealed that 3% of insurers have a policy setting out how they engage with investee firms on climate risk, compared with 15% of pension funds.
Julian Poulter, CEO of the AODP, said climate change posed "a double threat" to the insurance industry and players faced "mounting costs" from claims relating to the impact of climate change.
He said: "Insurers are specialists in risk management, but while they may understand the implications of climate change in their underwriting, they are failing to join the dots on the investment side. It is extraordinary that the left hand doesn't seem to know what the right hand is doing."
Poulter also warned insurers risked losing trillions of dollars of investment, adding: "By failing to protect their portfolios they are threatening their long-term capacity to cover future claims, putting clients' policies in jeopardy, and risking a systemic failure that could have catastrophic effects on the wider economy.
"When pension funds are starting to act there can be no excuse for insurers to lag behind."