Cape Town/Geneva/Nairobi,
22 October 2009 - Global insurers controlling
assets worth trillions of US dollars have
joined with the world's
leading academics in a United Nations-backed
survey putting the industry's approach to
sustainability and climate risks under forensic
examination.
Coming just six weeks
before the pivotal United Nations 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 United Nations 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, to be
launched today (22 October) at a major UN
gathering of financial service companies
in Cape Town, South Africa (www.unepfi.org),
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. (Please
see some of the key findings and recommendations
of the report under Notes to editor below.)
Achim Steiner, UN Under-Secretary-General
and UNEP Executive Director, commenting
on the report 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.
HRH The Prince of Wales,
in a foreword to the report, writes: "Insurance
companies play a pivotal role in identifying
and assessing new and emerging risks. No
other sector takes a longer term or more
carefully calculated professional view of
the future. Their approach to sustainability
is therefore of fundamental importance,
not only to the rest of the corporate sector,
but to the whole of human society. So I
am delighted to introduce this timely and
comprehensive global sustainability survey
of the insurance industry by the UNEP Finance
Initiative."
HRH Prince Charles concluded:
"Climate change is the global challenge
that will define our generation. But it
is important not to lose sight of the other
sustainability challenges that we face,
such as biodiversity loss, water management,
rapidly increasing population growth and
rapid, unplanned urbanization. In all these
and many other areas of human life we need
to find more sustainable ways of running
our economies. This survey demonstrates
that the insurance industry recognizes the
importance of these challenges and is developing
responses that truly reflect the level of
risk."
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 organizations
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 (PRI,
www.unpri.org) 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."
Clements-Hunt added:
"If a set of Principles for Sustainable
Insurance are developed then they will serve
a range of purposes, including: acting as
a dynamic best practice framework; pooling
the industry's information and resources
on ESG issues; informing regulators and
policymakers about the industry's actions;
creating a global sustainability forum for
the industry and its stakeholders; driving
innovative solutions; and accelerating collective
action on global sustainability challenges."
The comprehensive UNEP
FI survey covers a wide spectrum of ESG
factors as they relate to the insurance
business, primarily - climate change, biodiversity
loss and ecosystem degradation, water management,
pollution, financial inclusion, human rights,
emerging manmade health risks, ageing populations,
regulations, disclosure, ethics and principles,
and alignment of interests.
The survey obtained
respondents from 60 territories worldwide
- from Africa, the Asia-Pacific, Europe,
North America, and Latin America and the
Caribbean - with over 3,800 years of cumulative
insurance experience, and generated nearly
2,700 pages of data.
Butch Bacani, Programme
Officer for Insurance and Investment at
UNEP Finance Initiative and the report's
Project Lead and Chief Editor, said: "This
report is the result of a truly collaborative,
global effort, and offers profound insights
on the dynamics of ESG factors and core
insurance operations, the state of play
of sustainable insurance thinking and practice,
global sustainability challenges and potential
solutions, and the many opportunities that
remain largely untapped. Equally, it is
a testament to the vital role of the insurance
industry as an early warning system for
society, as a catalyst for finance and investment,
and as a pillar of economic prosperity and
sustainable development.
"Since the insurance
industry's core business is to understand
and manage risk, it has tremendous capacity
to tackle global sustainability challenges.
In line with its provision of risk management
services and insurance products, and as
major institutional investors, the insurance
industry is uniquely positioned to help
identify and mitigate global systemic risks
and avert crises, including the potentially
highly complex and profound 'natural resources
crisis' arising from the unsustainable use
of a wide range of natural resources such
as the climate, biodiversity and ecosystems,
and water," he added.
Nick Nuttall, UNEP Spokesperson and Head
of Media
Paul Clements-Hunt, Head, UNEP Finance Initiative
Butch Bacani, Programme Officer, Insurance
& Investment, UNEP Finance Initiative
/ Project Lead and Chief Editor of "The
Global State of Sustainable Insurance"
Notes to editors:
The new UNEP Finance
Initiative report, "The Global State
of Sustainable Insurance - Understanding
and integrating environmental, social and
governance factors in insurance", can
be downloaded at: http://www.unepfi.org/fileadmin/documents/global-state-of-sustainable-insurance.pdf
Some key findings and
recommendations of the comprehensive report:
1. ESG factors are relevant
to both the insurance and investment operations
of insurance companies. Therefore, the global,
long-term and systemic risks posed by many
ESG factors can undermine the solvency of
an insurance company and the long-term economic
health of the insurance industry, including
insureds and entities financed by insurance
capital.
2. Given their multiple
roles as risk managers, risk carriers and
institutional investors, insurance companies
have immense capacity to manage ESG factors.
However, in a highly competitive, fragmented
and regulated industry, tackling ESG factors
entails overcoming major challenges.
3. ESG factors influence
insurance underwriting, and have varying
degrees of impact across lines of insurance.
4. Proper management
of ESG factors potentially enhances insurance
company earnings and long-term company value
via avoided loss and new product offerings.
5. Given their assessment
of ESG risks, insurance underwriters judge
the societal response for many ESG factors
as underdeveloped.
6. The evolution of
ESG factors in developing regions is different,
but there are aspects common globally.
7. Active promotion
and adoption of integrated ESG risk management
and financing is needed.
8. Effective ESG risk
management and financing entail the systematic
integration of material ESG factors into
company-wide policy and core insurance processes
(e.g. underwriting, product development,
investment management, claims management,
sales & marketing).
9. In order to effectively
promote and adopt ESG risk management and
financing at the industry and global levels,
the insurance industry should develop and
adopt "Principles for Sustainable Insurance",
a best practice framework focused on ESG
factors, tailored to the insurance business,
grounded on risks and opportunities, and
in line with the goals of sustainable development.
10. Policymakers and
regulators should ensure prudential regulatory
or legal frameworks on ESG factors, where
appropriate.
11. Civil society institutions
should collectively bolster their understanding
of the insurance industry such that they
can play a full role in ensuring that the
insurance industry is sustainable and providing
products and services that duly take ESG
factors into account.
12. The academic community
should continue to advance research on ESG
factors and the insurance industry.
UNEP Finance Initiative
(UNEP FI)
UNEP FI is a strategic
public-private partnership between UNEP
and the global financial sector. UNEP works
with over 180 banks, insurers and investment
firms, and a range of partner organisations,
to understand the impacts of environmental,
social and governance factors on financial
performance and sustainable development.
Through a comprehensive work programme encompassing
research, training, events and regional
activities, UNEP FI carries out its mission
to identify, promote and realise the adoption
of best environmental and sustainability
practice at all levels of financial institution
operations.
Learn more at: http://www.unepfi.org
UNEP Green Economy Initiative
Mobilizing and refocusing
the global economy towards investments in
clean technologies and 'natural' infrastructure
such as forests and soils is the best bet
for real growth, combating climate change
and triggering an employment boom in the
21st Century. On 22 October 2008, UNEP and
leading economists launched the Green Economy
Initiative (GEI) aimed at seizing an historic
opportunity to bring about tomorrow's economy
today. The GEI, which will initially run
for a period of two years, has three key
elements: the Green Economy report, which
will provide an overview, analysis and synthesis
of how public policy can help markets accelerate
the transition towards a green economy;
The Economics of Ecosystems and Biodiversity
(TEEB), a partnership project focusing on
valuation issues; and finally the Green
Jobs report, published in September 2008,
that looked at employment trends.
Learn more at: http://www.unep.org/greeneconomy
UNEP FI Insurance Working Group
The UNEP FI Insurance
Working Group is a strategic alliance of
insurers and reinsurers that work together
to understand the impacts of environmental,
social and governance (ESG) factors on the
insurance business and sustainable development,
and to advance the integration of ESG factors
into core insurance processes.
Member institutions:
Achmea, Allianz, Aviva,
AXA, Chartis International, Folksam, HSBC
Insurance, Insurance Australia Group, Interamerican
Hellenic Insurance Group, Lloyd's, MAPFRE,
Munich Re, RSA Insurance Group, Swiss Re,
Storebrand, The Co-operators Group, Tokio
Marine Nichido, and XL Insurance.
Learn more at: www.unepfi.org/work_streams/insurance
UNEP FI Academic Working Group
The UNEP FI Academic
Working Group was established by the UNEP
FI Insurance Working Group to support its
research on the impacts of environmental,
social and governance factors on the insurance
business and sustainable development.
Lead academic institution:
Fox School of Business, Temple University
Advisory academic institutions:
Earth Institute, Columbia
University; Glasgow Caledonian University;
International Institute for Applied Systems
Analysis; Institute for Catastrophic Loss
Reduction; University of Cambridge; University
of Karlsruhe; University of Oxford; and
University of Verona
Learn more at: www.unepfi.org/work_streams/insurance
