23 June: What’s going on in ESG and insurance?
June 23, 2022
Welcome to our ESG roundup, keeping you up to date on the insurance industry’s most significant ESG-related news. The focus this month: Greenwashing.
Read our summary and analysis below.
Greenwashing has come into sharp view following the raid of DWS in Frankfurt last month, which led to their Chief Executive resigning. According to the FT many in the market believe the move is the beginning of regulators increasingly looking to legal means of holding companies accountable for greenwashing, this will no doubt extend to insurers’ investments, operations and underwriting – something which our head of ESG, Miqdaad Versi, warned of in his recent interview with the Insurer.
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Oxbow Partners’ Miqdaad Versi: Greenwashing poses threat of “legal ramifications” for industry (The Insurer)
Oxbow Partners’ head of ESG, Miqdaad Versi, has warned of the legal ramifications that could arise if a company is accused of greenwashing in relation to statements made about ESG initiatives. Versi spoke of the importance of “appropriate caveats and controls” for companies when disclosing details around ESG practices.
ESG’s legal showdown: ‘There’s nothing to suggest DWS is a one off’ (Financial Times – subscription required)
It has been suggested that the recent raid of DWS in Frankfurt as a part of a greenwashing investigation will be the first of many ESG-themed litigations in both Europe and the US. Increased sustainability investing in recent years has drawn regulatory scrutiny over overhyped claims and a lack of transparency, for example in metrics used to determine ESG ratings. Regulators are increasingly looking to legal means of holding companies accountable. Just last week, the SEC announced it is investigating Goldman Sachs’s asset management division over certain ESG claims made by its funds, one of many examples of ‘regulator activism’ occurring across Europe and the US.
Activists continue to pressure Lloyd’s
Lloyd’s of London targeted by Mary Poppins themed climate change protest (Insurance Times – subscription required)
Lloyd’s of London was recently targeted by a Mary Poppins climate change flash mob. The Mothers Rise Up climate action group created a song and dance compilation outside of the Lloyd’s building to protest the insurance marketplace’s role in jeopardising children’s futures by underwriting fossil fuel projects.
Climate change and net-Zero
Prince of Wales: Climate change requires “full endeavour“ of insurance sector (The Insurer – subscription required)
In his speech at the ABI Climate Summit 2022, The Prince of Wales commented that the UK’s insurance industry has a ‘fundamental role’ to play in building resilience in the wider economy and enabling the global transition to net-zero. He urged firms to use their positions as institutional investors and knowledge of risk transfer to speed up the transition to net-zero.
UK insurers need to look closer at climate risks, watchdog says (Bloomberg – subscription required)
The Financial Reporting Council (FRC) is proposing rules that will ensure that actuaries factor in climate change risk, as regulators and insurers become increasingly concerned after a rise in natural disasters. While the FRC found actuaries are good at accounting for more established risk areas, they are not as strong when considering non-traditional risks such as climate change.
Glasgow net-zero alliance publishes plan guidance (The Insurer – subscription required)
GFANZ has published a framework to help global (re)insurers and financial institutions create credible plans to transition to net-zero emissions by 2050. The framework will allow financial institutions to demonstrate, and stakeholders to judge, the credibility of its plan to accelerate & scale clean energy and transition-related finance to levels consistent with limiting global warming to 1.5°C.
Progress on NZIA standard a “crucial step” on industry road to net-zero (The Insurer – subscription required)
Senior executives at Allianz, AXA and Swiss Re have highlighted the need for a standard methodology to measure the carbon footprints of insurance portfolios (& underwriting activities). While industry engagement over decarbonisation has increased significantly, accelerated by the launch of initiatives such as NZIA, according to the executives the industry is still lacking the means of measuring the carbon footprint of an insurance contract.
Therefore, the NZIA’s plans to create an effective mechanism to measure the emissions of underwriting activities, will be pivotal in the industry’s efforts to insure the transition towards net-zero. The NZIA is currently working with the Partnership for Carbon Accounting Financials to establish a methodology for the standard.
Green funds have a Paris alignment problem (S&P Global)
Recent analysis by S&P Global Sustainable1 provides a summary of the current state of equity investing — showing there is still a long way to go towards aligning investor capital with the Paris Agreement goal of limiting warming to ‘well below’ 2°C. The analysis found that only 11% of 12,000 equity mutual & exchange traded funds (>$20T market value) are aligned with the Paris Agreement.
Ping An increases its green investment targets (Reinsurance News)
Ping An is targeting RMB400bn (c.£48bn) in green investments by 2025, this will include investments in buildings, roads with green licence and clean energy projects. Furthermore, Ping An is working both internally and externally to support net-zero greenhouse gas emissions targets. The Group aims to achieve operational carbon neutrality by 2030 while focusing on ESG investing and insurance.
BP Marsh turns spotlight on ESG with new committee (The Insurer – subscription required)
BP Marsh, the insurance-focused capital firm, has taken steps to formalise its strategy on ESG by launching a committee tasked with developing a strategy to embed ESG issues within decision-making, monitoring and implementation. As part of this drive, BP Marsh pledged to formally report on the committee’s activities in each of its subsequent investor and trading updates.
ESG commitments and new propositions
Allianz partners with the IDF on sovereign risk transfer scheme for urban floods in Ghana (IDF)
Allianz has announced its first InsuResilience Solutions Fund (ISF) project in partnership with the IDF. The project is an insurance solution for the Government of Ghana, covering urban floods in the Greater Accra Metropolitan Region (GAMA) and protecting the vulnerable parts of the population. The parametric insurance solution will enable quick pay-outs in case of a flood, improving resilience and supporting the re-establishment of economic activity of low-income communities in urban areas, starting with GAMA.
International Underwriting Association launches new ESG committee (Insurance Times – subscription required)
The IUA has established a new committee focusing on ESG issues, made up of representatives from 20 of the association’s member companies. The aim of the committee is to help promote sustainability initiatives across the insurance industry and exploring the ‘soft power’ of insurers to influence the behaviours of clients.
Zurich declares new sustainability targets and initiatives (Insurance Business)
Zurich Australia and New Zealand has reaffirmed its commitment to sustainability by announcing new targets, roles, and customer initiatives. The new sustainability plans follow Zurich Insurance Group’s announcement that it had brought forward its global net-zero operations target by 20 years, with a new target of 2030.
MS&AD joins Net-Zero Insurance Alliance (Insurance Day)
MS&AD has joined the NZIA, committing to the development of international standards for the decarbonisation of underwriting portfolios and supporting companies on the decarbonisation journey.
Zurich makes ad using old footage in sustainability statement (Insurance Day)
Zurich has produced a sustainable TV advertising campaign, ‘Upcycled,’ where it re-uses old footage to limit the production of carbon to the absolute minimum by negating the need for on-site location shoots and accompanying transportation.