About the author
Eleanor Ewen
7 July: What’s going on in ESG and insurance?
July 7, 2022 Eleanor Ewen
Welcome to our ESG roundup, keeping you up to date on the insurance industry’s most significant ESG-related news. The focus this month: 10 years of PSI.
Read our summary and analysis below.
Analysis
Last month marked the 10-year anniversary of the United Nations Principles of Sustainable Insurance (PSI). Since its launch in 2012, more than 220 organisations have joined PSI representing one-third of world premium and US$15 trillion in assets under management. PSI was launched with the simple goal of ‘greening’ the insurance sector and has since grown to become the ‘largest collaboration between the United Nations and the insurance industry’. Through the initiative, best practice frameworks and guidance have been designed to embed sustainability in insurance businesses around the globe. One of the greatest developments of the PSI however, has been the launch of the Net Zero Insurance Alliance (NZIA), which now has 28 members and continues to grow each month.
Summary
ESG data and ratings
MSCI launches tool to measure emissions of investment & loan portfolios (ESG Today)
MSCI have launched the Total Portfolio Footprinting tool to help financial institutions measure the carbon emissions of their lending and investment portfolios. Total Portfolio Footprinting will enable companies to set and manage reduction targets for their financed emissions against a baseline, aligns with their net-zero commitments. The solution includes climate data and models to help users align with key climate and sustainability measurement and reporting standards, including the Taskforce for Climate Related Disclosure (TCFD).
Allianz backs sustainability data firm ESG Book (The Insurer – subscription required)
Allianz has been named as one of the investors in the $35 million Series B funding round for ESG Book, a global provider of cloud-based sustainability products and solutions. ESG Book makes ESG data accessible, consistent and transparent, enabling financial markets to allocate capital towards more sustainable and higher impact assets. The company covers 25,000 companies globally. Allianz cited the need for better availability of ESG data as the core reason for the investment.
Beazley offers additional capacity via Lloyd’s syndicate to Marsh ESG Risk Rating (Insurance Review – subscription required)
Beazley’s Lloyd’s of London Syndicate 4321 has joined Marsh’s risk rating line-up on its ESG Risk Rating (ERR) tool. ERR is an assessment tool to measure an organisation’s ESG performance, enabling organisations to improve their ESG risks and gain access to additional insurance capacity. Clients who adopt ERR will now be offered global access capacity through Beazley’s Syndicate 4321.
Marsh: More D&O insurers rewarding buyers that have robust ESG frameworks (The Insurer – subscription required)
Marsh has announced enhancements to its D&O insurance offering, noting underwriters are increasingly recognising organisations with strong ESG risk management as “better risks”. One such policy improvement is the new “Side D” entity coverage for regulatory investigation costs relating to climate-related financial disclosures, within its London carrier-backed Marsh Delta D&O facility. Clients that score highly using established ESG risk methodologies, including Marsh’s ESG Risk Rating tool, are eligible for the coverage.
Regulation
FCA supports regulation of ESG ratings (Financial Times)
The FCA has expressed its support for the regulation of ESG data and ratings agencies. ESG ratings have recently been criticised for their subjective nature and lack of standardisation as companies become increasingly reliant on third-party ESG data and rating services to demonstrate their ESG credibility. The FCA and Treasury are therefore in the consultation stage of introducing regulations aimed at reducing concern over the lack of transparency on ESG definitions.
EU to require auditing of sustainability reporting, disclosure by large non-European companies (ESG Today)
The EU has agreed upon the rules of the Corporate Sustainability Reporting Directive (CSRD), intended as an update to the current Non-Financial Reporting Directive (NFRD) sustainability reporting framework. The new rules will require companies to have their reported sustainability information independently audited, mandate disclosure under a common framework (currently under development) and will expand the number of companies required to provide sustainability disclosures from 12,000 to 50,000. This marks a step towards the implementation of a new sustainability reporting system in Europe and will come into effect in 2024.
Building resilience
G7 commits to scale up insurance for vulnerable countries (The Insurer – subscription required)
G7 leaders have warned of the urgent need to scale up climate and disaster risk finance and insurance at the most recent summit. The G7 highlighted the need to provide more support for vulnerable countries in coping with the damage and loss caused by climate change. Notably, Joe Biden pledged support for African Risk Capacity (ARC) as part of a $760mn investment to help African governments respond to food system shocks by increasing access to risk insurance products.
Gallagher Re evolves climate resilience offering with new practice (Insurance Business)
Gallagher Re has established a Public Sector & Climate Resilience Solutions practice. The practice will help to manage and reduce the financial impact of climate and disaster risks on governments, insurers and reinsurers, banks and businesses, focus on promoting financial preparedness, de-risking strategies, and making use of established and innovative risk management tools, including through weather derivatives and parametric products.
Commitments
IUA steps up climate commitment with ESG committee (The Insurer – subscription required)
The International Underwriting Association (IUA) has launched an ESG committee to promote sustainability initiatives across the industry and explore how insurers can seek to influence their clients on ESG matters. Among the issues discussed at the committee’s first meeting were efforts to end modern slavery and forced labour, and initiatives to measure ESG commitments in the insurance sector.
Sompo Group affirms commitment to climate policies (Reinsurance News)
Sompo has published its climate policies and announced a new Climate Action scheme as part of their medium-term plan for mitigating climate change. Central to this, Sompo has joined the Net Zero Insurance Alliance and become the first Asian insurer to exclude coal from its underwriting and investment portfolios.
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