What is sustainable insurance?
It is a way for the insurance industry to contribute to sustainable development by managing risks that are related to climate change, environmental degradation and social inequality. By considering environmental, social and governance (ESG) factors in underwriting and investments strategies, insurance companies look beyond immediate results and look to make a positive impact on society and the environment.
Why is sustainable insurance necessary?
Sustainable insurance is necessary because it helps to minimise the risks and negative impacts that insurance companies and their clients may have on the environment and society. These factors include, amongst others:
Climate change: By adopting sustainable practices, insurance companies can promote the transition to low-carbon economies and help to mitigate the effects of climate change on communities and business.
Reputation: Customers are increasingly demanding sustainable practices from the companies that they buy from. By adopting sustainable insurance measures can improve the reputation of insurance companies and their clients, by demonstrating their commitment to the environment and society.
Risk Management: Insurers are increasingly incorporating environmental risks into their underwriting and sustainable insurance practices can help manage these risks. By promoting more responsibility and eco-friendly practices the likelihood of insurance claims can be reduced, thereby improving the overall risk profile of the industry and the companies it serves.
How do you go about developing a sustainable insurance strategy?
Developing a sustainable insurance strategy requires a commitment to ongoing improvement and collaboration amongst stakeholders and clear communication with clients. It needs to be customised to your specific context and business objectives.
As an initial step, identify the key environmental, social and governance issues relevant to your business and customers. This may include assessing opportunities related to climate change, social inequality, and other material issues which align with the company objectives.
Determine how insurance products and services impact these areas and how we can positively contribute in reducing negative impacts or leveraging opportunities. By setting practical and measurable goals the company can monitored, review and adjust parameters which have been integrated into the business operations, procurement procedures and engagement initiatives.
Organizations like the United Nations Environmental Program Finance Initiative have served as a catalyst in bringing together a large network of banks, insurers and investors across the financial system to deliver more sustainable global economies.
UNEP FI was the first organisation to engage the finance sector on sustainability and incubated the Principles for Responsible Investment, now the world’s leading proponent of responsible investment.
They have successfully developed some of the world’s leading sustainability frameworks that have helped the finance industry address ESG challenges.
The Roundtable for Africa will convene 14-15 June in Namibia, you can follow this link for more information UNEP FI Regional Roundtable Africa and Middle East 2023 – United Nations Environment – Finance Initiative
Article written by: Simphiwe Mtyali