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Eleanor Ewen
29 September: What’s going on in ESG and insurance?
September 29, 2022 Eleanor Ewen
Welcome to our ESG roundup, keeping you up to date on the insurance industry’s most significant ESG-related news. The highlight this month: Navigating ESG with Miqdaad Versi and the Voice of Insurance.
Read our summary and analysis below.
Analysis
How to navigate ESG
ESG in insurance continues to develop as collaborative efforts start yielding fruits.
PCAF will be launching their approach for attributing the emissions of insureds to the Scope 3 (category 15) at COP27. And early next year, we will see the fruits of the NZIA’s work on net-zero methodology in insurance.
Whilst some of the world’s largest insurers/reinsurers are well linked into these initiatives, many medium (and even quite large) insurers and reinsurers are struggling to keep up. Whether it is training their underwriters & investment teams on ESG, aligning their leadership on an ESG ambition or investing in ensuring there is sufficient resource to enact their strategy, many insurers have a long way to go to catch up.
This week, Miqdaad Versi, Head of ESG at Oxbow Partners spoke to Mark Geoghegan on The Voice of Insurance podcast in a special episode dedicated to Navigating ESG. Miqdaad and Mark discuss all things ESG; how to navigate ESG’s threats, as well as how to make the most of the huge opportunities it will throw up. In Mark’s words, “If you have been too scared even to start thinking about what to do about the enormous ESG challenge ahead, this is an excellent place to begin.”
Summary
Oxbow Partners on ESG
Oxbow Partners’ Head of ESG, Miqdaad Versi, discusses all things ESG in a special episode of the Voice of Insurance (Voice of Insurance)
Miqdaad Versi, Head of ESG at Oxbow Partners spoke to Mark Geoghegan on The Voice of Insurance podcast in a special episode dedicated to Navigating ESG. Listen to Miqdaad and Mark discuss:
- How to navigate ESG’s threats, while making the most of opportunities it will throw up
- The internal drivers of ESG: top-down or bottom-up?
- The first step to getting started: Setting ambition and documenting current ESG activity
- How we go about building a common ESG framework
In Mark’s words, “If you have been too scared even to start thinking about what to do about the enormous ESG challenge ahead, this is an excellent place to begin.”
Exclusions
Fidelis strengthens underwriting restrictions on fossil fuels (The Insurer – subscription required)
Fidelis is extending its underwriting fossil fuel restrictions having stopped providing insurance for thermal coal plants, projects, and infrastructure in 2020. The extended guidelines span defence & armaments, forestry & agriculture, mining, coal, oil & gas, and nuclear:
- Coal: Fidelis will only insure metallurgical coal if there are clear commitments and a timeline for achieving net zero emissions
- Oil & gas: The guidelines include not directly insuring tar sand extraction, Artic oil & gas exploration and drilling, and fracking operations
- Similarly, Fidelis will not insure companies whose revenues from the above mentioned activities account for more than 20% of total revenues
The new guidelines currently only apply to insurance business, however an approach for treaty reinsurance is being explored.
Considering nature
AXA IM launches €500 million nature-based solutions strategy (ESG Today)
AXA Group’s alternative investments business AXA the IM Alts has announced the launch of a new Natural Capital strategy, expanding its platform of nature-based solutions aimed at addressing climate change and preserve biodiversity. The strategy is being rolled out with €500 million in commitments from AXA Group investors. The launch forms part of a commitment last year by AXA group to invest €1.5 billion to support sustainable forest management. AXA anticipates its investments will enable 25 megatons of CO2 to be captured annually.
Integrating climate and nature: The rationale for financial institutions (CISL)
CISL has published a new report detailing the importance of an integrated approach to addressing environmental challenges, encompassing climate and other nature-related issues. The rationale for financial institutions to integrate climate and nature considerations include the:
- materiality of nature-related risks, over climate-related financial risks
- unintended consequences for nature when actions focus exclusively on climate mitigation and adaptation
- compounding effects from interactions between climate change and nature loss
- potential cost efficiencies from addressing climate change and nature together
- macroprudential risks to the stability of the financial sector.
Renewable energy
3 takeaways from a renewable energy study (Argo)
Renewable energy is one of the largest emerging sectors in insurance but for insurers entering a market with limited loss data, it can be hard to know where to begin. Researchers at the University of Illinois Urbana-Champaign investigated multiple forms of renewable energy. Three key findings from the study include:
- Hydrogen and batteries offer the most promising opportunities
- Subsidies can ease insurers’ entry into renewable markets
- Insurers can act now to help the renewable market grow
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- Gather more data. Loss data for new technology is sometimes sparse but insurers can help make it more robust
- Speak to clients. Insurers can assess market needs and grow their relationships by engaging with renewable energy clients
- Improve the model. As more information becomes available, insurers should refine the models to determine which markets are strongest
Climate change discussion is ‘more urgent than ever before’ to gain independence from Russia (Insurance Times – subscription required)
The global drive to mitigate climate change and embrace renewable energy “is more urgent than ever” – not only to combat the recent uptick in associated secondary perils, such as flooding, but to also secure independence from Russia, the world’s key fossil fuel provider.
London market has ‘real opportunity’ to be ‘an innovator’ for climate change transition risks (Insurance Times – subscription required)
Brokers, insurers, regulators and markets all have a role to play in supporting the transition to net-zero carbon emissions. The (re)insurance industry – and the London market in particular – “can actively be a positive force” when it comes to creating propositions and supporting net zero transition risks because it can pull on its “long history of innovation” and “risk engineering skills”.
Setting ESG standards
Insurance lobby pushes back against EU’s ESG rules (City A.M.)
In a response to an EU consultation, Insurance Europe called on the bloc to hold back from setting “overly prescriptive” ESG standards, particularly in regard to human rights, as it called for climate standards to be prioritised. The trade body warned new human rights rules could “lead to unintended bias” against non-EU companies and that setting overly prescriptive standards could impose a “significant burden on companies and create undue complexity”.
