How insurance companies can embrace sustainability

A Sustainable Insurance Roadmap was made to guide companies on how they can incorporate sustainability into their strategies.

The Better Insurance Network has recently released a new report teaching insurance companies how they can effectively implement and refine their sustainability strategies.

In “The 2024 Sustainable Insurance Roadmap & Report,” the group listed eight priority areas for companies when implementing sustainability, one of which is progressing on net zero.

“To align with global or corporate Net Zero targets, insurers need to drastically reduce emissions in underwriting, claims, and investments - a huge and complex task which demands tangible progress today,” the report read.

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Some of the ways to achieve this include engaging with and incentivising insureds, investees, and suppliers, tilting underwriting and investment portfolios towards lower emission clients, and developing a strategy for driving down claims emissions.

Another area insurance companies should focus on is embracing nature-positive insurance. This can be done by conducting a nature-related materiality assessment, identifying hotspots for risks, impacts dependencies, and opportunities, and engaging clients on their risks, impacts and dependencies, among others.

The Better Insurance Network also said insurance firms should also operationalise environmental, social, and governance (ESG) data strategy. Some key actions to do this are identifying ESG data needs and relevant sources, and embedding these in underwriting decision-making.

Another key area companies should focus on is enhancing climate risk understanding, the group said. Firms can do so by conducting a baseline assessment of climate exposures, incorporating a broad range of climate risk factors into decision-making and exposure management, and overlaying a climate risk lens across all classes of business.

Insurance firms should also build their climate resilience by embedding resilience and adaptation in underwriting and claims strategies and ramping up investment, education and advocacy.

In incorporating sustainability, the Better Insurance Network said companies should also consider the United Nations Sustainability Goals. They should identify what their priority is, embed it in their strategies, and implement actions to support SDG impact within business processes.

The group said another focus area is scaling energy transition. To do so, they should upskill underwriting teams to take on emerging risks, allocate innovation capital with a view to making returns over a longer-term horizon, and collaborate with brokers and competitors to develop new risk financing structures.

Lastly, insurance firms should make sure they “make tangible, real-world impacts in each of these action areas,” the Better Insurance Network said.