Long-term economic health of insurance industry hinges on management of sustainability & climate risks, says UN-backed global survey
Global insurers controlling assets worth trillions of US dollars have joined with the world's leading academics in a UN-backed survey putting the industry's approach to sustainability and climate risks under forensic examination.
Coming just six weeks before the pivotal UN climate summit in Copenhagen, Denmark, the report has been welcomed by the UN's environmental head and HRH Prince Charles.
The report highlighting the first-ever such global survey of the powerful insurance sector, and backed by the UN Environment Programme (UNEP), says that the industry has a fundamental role to play to speed the transition to a clean, green, low carbon global economy that supports sustainable development and tackles the threat of global warming head on.
The document reveals that senior executives from the powerful sector are convinced that in order to sustain their industry's long-term economic health, they must systematically integrate key environmental, social and governance (ESG) factors into insurance company underwriting guidelines and product development, and other core operations such as investment management, claims management, and sales and marketing.
The report, entitled, "The Global State of Sustainable Insurance - Understanding and integrating environmental, social and governance factors in insurance", summarises the key findings of the UNEP Finance Initiative global survey conducted this year, the nature and scope of which made it the first of its kind ever.
Achim Steiner, UN Under-Secretary-General and UNEP executive director said: "The insurance industry has long been in the vanguard of understanding and managing risk, and has served as an important early warning system for society by amplifying risk signals. Through loss prevention and mitigation, by sharing risks over many shoulders, and as major investors, the insurance industry has protected society, shaped markets and underpinned economic development."
"And the message is loud and clear - insurers are communicating strong risk signals stemming from a wide range of environmental, social and governance issues - from climate change, biodiversity loss and ecosystem degradation and water scarcity, to poverty, emerging manmade health risks, ageing populations, child labour and corruption," he said.
The report is based on a pioneering global survey conducted this year by the Insurance Working Group and Academic Working Group of UNEP Finance Initiative (UNEP FI), a strategic partnership between the UN's environmental arm and over 180 financial institutions and partner organisations worldwide.
The 100-plus page report articulates the insurance industry's assessment that the societal response to managing the global, long-term and systemic risks posed by many ESG factors is underdeveloped. The report builds a case for the industry to develop "Principles for Sustainable Insurance" similar to the UN-backed Principles for Responsible Investment which were incubated by UNEP FI between 2003-2006 and launched by the institutional investment industry in April 2006. The PRI is now backed by more than 600 institutions representing US18 trillion in assets.
Paul Clements-Hunt, responsible for the team preparing the UNEP FI study, explained: "Insurers and reinsurers have been at the forefront of the financial service sector's efforts to come to grips with climate risk over the past fifteen years and now they are turning to a broader range of ESG issues in a way that has the power to fundamentally shift thinking across the sector about how to manage planetary challenges and risks associated with resource depletion."
