What can insurers have done by this time next year to advance ESG principles in their strategy and to support both their own and broader net zero emissions pledges?
While COP26 in Glasgow may not have resulted in the level of government commitments that had been widely advocated, one thing it most definitely did do was shine a more intense light on the role of, and expectations for, financial institutions and the financial services industry as a whole in transitioning to net zero and assuming its social responsibilities.
It was the first COP that the private sector has attended en masse and there was widespread recognition of the need for issues to be addressed in a joined-up way across the public and private sectors. Perhaps the most visible demonstration of that was that the group of 450 banks and insurers that are part of The Glasgow Financial Alliance for Net Zero (Gfanz) committed $130 trillion to tackle climate change between now and 2050.
On the one hand, (re)insurers around the world can expect a further raft of climate-related regulatory and reporting obligations in the coming months and years, while COP26 will also almost certainly ramp up the pressures for action that were already building before the conference from a broad church of stakeholders, including employees and potential recruits.
But to focus only on climate 'sticks' is to miss the point.
Fundamentally, addressing climate change by reducing greenhouse gas emissions is a big opportunity for the insurance industry from several perspectives, as already recognised in the formation of the Net Zero Insurance Alliance, including how it generates investment income, how it underwrites risks and how it makes available contingent capital, and as a source of broader customer engagement and reputation enhancement. Commitments coming out of COP26, such as the goal of doubling spending on adaptation and resilience and initiatives such as the US, UK, EU Green Infrastructure commitment are definite positives for the insurance industry.
So, what can insurers be doing in the shorter term to get prepared and to capitalise on climate-related opportunities.
