Marsh McLennan is arranging insurance for a controversial east African oil pipeline, putting the world’s largest broker at the centre of a project that has been shunned by major banks and prompted a backlash from its own staff.
The $5bn East Africa Crude oil pipeline (Eacop), which will run from Uganda to the Tanzanian coast, is fast becoming a litmus test for how willing banks and insurers are to work on environmentally contentious projects.
The involvement of Marsh, revealed by the Bureau of Investigative Journalism and the FT, is a boost for the planned pipeline, being developed by France’s TotalEnergies and Chinese state oil group Cnooc.
The project will cross multiple nature reserves and the basin of Lake Victoria, displacing households in Uganda and Tanzania across the stretch of the 1450km pipeline. It will turn Uganda into an oil producer for the first time.
New York-based Marsh is backing the project even as an increasing number of banks and insurers are distancing themselves from it. JPMorgan Chase, Citigroup, Wells Fargo and Morgan Stanley have all ruled out any financing role, according to people familiar the matter.
Beazley, the Lloyd’s of London specialist insurer, is also unwilling to provide any cover. The banks and Beazley declined to comment.
The US banks and Beazley join more than a dozen major lenders and seven insurers, including Munich Re, Allianz and Axa, that have already ruled out working on a project that has become a target of environmental campaigners.
Marsh’s involvement comes in spite of a letter of protest from more than 100 of the group’s staff last summer, in correspondence seen by the BIJ and the Financial Times.
In a letter to Marsh’s management, the employees urged the group not to help secure insurance for the pipeline, citing the “disastrous consequences” for the climate and the company’s reputation.
Describing its involvement as an “unacceptable risk”, the staff questioned whether the group’s clients would “trust us to provide climate risk management if they know we also support projects which worsen these very risks”.
Although insurers have faced growing scrutiny over their role in underwriting projects that could be damaging to the environment, the brokers that arrange such cover have drawn less attention.
Marsh, which also owns the consultancies Mercer and Oliver Wyman, is one of the industry’s most powerful brokers, with a total group market capitalisation of $77bn.
In a response to staff, also seen by the BIJ and the FT, Marsh McLennan’s chief executive Dan Glaser and John Doyle, head of the broking arm, said they did not have a set policy against working with any individual company or industry. It did “evaluate proposed engagements” against its sustainable development goals, they added.
The objection from employees reflects the growing unease companies face from within their own ranks over activities with an environmental impact. Management consultancy McKinsey faced a similar pushback back over its work for major oil and gas producers, including BP, ExxonMobil and Saudi Aramco.
Marsh would not comment specifically on clients or the pipeline project. It said it believed all communities were best served by working with clean energy clients, but also with traditional energy clients to help them manage the energy transition. “We recognise that a secure energy supply is crucial for the global economy and society as a whole — this is particularly true in the context of today’s geopolitical environment,” it added.
Eacop is not the first controversial oil and gas project that Marsh has been involved in. It is in charge of finding insurers for the Trans Mountain pipeline in Canada that takes crude from the oil sands of Alberta to the coast of British Columbia.
While the Marsh McLennan group recently released a plan to cut its emissions by 50 per cent by 2030, that commitment does not include the carbon emissions it facilitates through insurance broking.
The east African project will produce 230,000 barrels of oil per day at its peak, generating indirect annual emissions of more than 34 million tons of carbon dioxide equivalent.
TotalEnergies said Eacop remained on track and the financing was “targeted to complete later this year”. It said it was actively working on the securing finance with “a pool of Western, Asian and African banks”, and the pipeline itself was on budget and on schedule for completion in 2025.
“Whilst we are aware of the public position of some reinsurers, Eacop is actively progressing the tender stage to insure the project during the construction phase,” the oil and gas group said.
Potential financial advisers for the project include Standard Chartered, Standard Bank and Sumitomo (SMBC). The financial advisers and potential lenders had commissioned an independent adviser to conduct due diligence, Standard Bank said.
“As part of this process, the advisers have visited the project area and will issue a full due diligence report in the coming months, at which time potential lenders will make a decision on the way forward,” said the South African bank. Standard Chartered and SMBC did not comment.
Additional reporting by Sarah White in Paris