From rising levels of environmental pollution to reoccurring natural disasters, the risks of environmental unrest are growing, which has the potential to hinder fragile recovery in a volatile world.
The role of insurance in sustainable finance
Firms can advance sustainability through their underwriting decisions, their investment choices and by engaging with clients on environmental, social, and governance (ESG) issues.
Indeed, ESG factors are increasingly important in the assessment of the risks to insurers’ assets and liabilities – to the future value of insurance firms’ investment portfolios and to the size of the insurance claims that insurers are subject to each year.
How insurers choose to run their businesses in the face of these risks will affect their competitive positions, climate related litigation and reputations in the marketplace. It will also have an impact on the culture of the firm and may affect employee engagement and, ultimately, the ability to attract and retain talent.
ESG regulation is also looming, which means understanding, measuring, and prioritizing ESG strategy is essential. Insurers must, therefore, rethink their businesses holistically and look across their entire value chain to address ESG-related risk, in a way that helps grow their business, enhance their brand and protect the planet.
There are four key areas where the insurance industry can make a real difference.