By Fabiana Negrin Ochoa

AIA Group Ltd. said Tuesday that it has exited coal investments and made new climate commitments amid rising pressure on the insurance industry to ditch fossil fuels.

The Asia-focused insurance giant said that as of October, it had sold coal-related investment holdings of about $10 billion, fully eliminating exposure to coal mining and coal-fired power in its directly-managed equity and fixed-income investments.

Hong Kong-listed AIA, which manages a $286 billion investment portfolio, had vowed in March to cut equity exposure to coal by the end of 2021 and exposure in fixed-income assets by 2028.

AIA joins a growing list of insurers seeking to decarbonize their portfolios as investors and activists pressure companies to stop financing fossil fuels while governments set more stringent emissions targets.

In July, 15 major insurers and reinsurers, including AXA SA, Allianz SE, Aviva PLC and Assicurazioni Generali SpA, committed to bring their underwriting portfolios to net-zero greenhouse gas emissions by 2050.

Asian insurers have traditionally lagged behind those in Europe and the U.S. in setting environmental targets, but that seems to be starting to change in some of the region's biggest economies.

In June, four major insurers in South Korea--DB Insurance Co., Hyundai Marine & Fire Insurance Co., Hanwha General Insurance Co. and Hana Insurance--said they would no longer support the construction or operation of new coal-fired power projects. The companies account for nearly half the sector's $52 billion of underwriting, according to IHS Markit senior climate analyst Amena Saiyid.

That same month, MS&AD Insurance Group Holdings Inc., one of Japan's largest nonlife insurers, also said it would no longer insure or invest in new coal power plants.

AIA reiterated Tuesday that it won't make any new investments in businesses directly involved in coal mining or generating electricity from coal. It didn't lay out plans to exit oil and gas.

When asked if the coal divestment covered assets managed externally, the company said that in some of its businesses, clients choose externally managed mutual funds to link to AIA insurance.

"These are under the control and discretion of the policyholders and we plan to work with the respective fund managers to improve disclosures and to offer our policyholders alternatives that are similarly focused on sustainability," it said.

The company also said it has committed to the Science Based Targets Initiative, a collaboration between the United Nations and various global environmental groups. More than 2,000 companies world-wide are part of the initiative, which aims to help corporations set goals that align with the Paris Agreement aims of limiting global warming.

AIA said it plans to integrate the SBTI commitment into its investment portfolio and get all investee companies to set their own science-based emissions targets by 2040. The insurer will also work with the global body to set comprehensive targets for its operational emissions, aiming to reach net zero by 2050. The five- to 10-year targets will be reviewed every five years.

Environmental advocates welcomed AIA's move, but urged the company to make clear how it defines coal companies in its investment policy.

"When AIA first announced plans to adopt a divestment policy, they defined coal companies as companies which depended on coal for more than 30% of their revenues," said Peter Bosshard of Australia-based Sunrise Project, a clean-energy advocacy group.

"This would have let diversified companies...that may derive less than 30% from coal but are still developing new coal capacity, off the hook," he said.

Shares in AIA closed 1.8% higher at 82.10 Hong Kong dollars for the day, bringing its market cap to HK$990.72 billion (US$127.01 billion).

Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com

(END) Dow Jones Newswires

12-07-21 0702ET