Environmental, social and governance (ESG) awareness is on the rise and insurance companies are beginning to respond more decisively, so much so that they stand to significantly influence and encourage the adoption sustainability principles in the companies they invest in and cover.
“Insurance companies are major investors, with estimated total global assets of about $36.3-trillion dollars in 2019,” DBRS Morningstar analysts say in their recently released commentary, entitled ESG Takes Centre Stage as Insurers Set Sustainability Goals and Restrict Cover to High Polluters. “They are setting ambitious emissions targets for themselves and restricting cover for some industries like high polluters in the energy and oil and gas sectors, notably the tar sands in Canada, and coal.”
They add that many of the world’s largest insurance providers have signed up to comply with the Principles for Responsible Investment (PRI), developed by the United Nations. “DBRS Morningstar expects that many insurance companies will adapt such frameworks in the future with the trend accelerating in the near term.”
The report briefly examines efforts and targets set by Aviva plc, the Zurich Insurance Group and Swiss Re to cut carbon emissions in both their operations and their investment portfolios. It also points to reports of at least seven global insurers and reinsurers placing restrictions on their exposure to the oil and gas sector.
In 2018, they add that 59 per cent of North American insurers surveyed by BlackRock said they have implemented sustainability investment policies. “The percentage of North American insurers that consider climate to be the most serious macro risk to their investment strategy over the next 12 to 24 months, increased to 21 per cent, from nine per cent, in one year,” they add. “European insurers are still in the forefront when it comes to ESG integration.”
