Insurers underperform on ESG integration

Channels: SAA/ALM, Managers, Outsourcing, Risk, Governance, Regulation

Companies: Vigeo Eiris, Principles for Responsible Investment, Asset Owners Disclosure Project

People: Peter Uhlenbruch, Chris Fowle

The insurance industry must improve its consideration of environmental, social and governance (ESG) issues, according to a report which ranked it 23rd out of 39 industries for its performance on reporting and integration.

The report, by research and rating agency Vigeo Eiris, looked at the performance of 159 listed insurers and found, on average, the insurance industry scored 29.7 out of 100. This was way below development banks that top the list with a score of 51, diversified banks (43.7) and specific purpose banks and agencies (41.5).

The report also highlighted European insurers are ahead of other regions in integrating ESG issues and overall the insurance industry's score for managing environmental issues was markedly below average- 20 out of 100. This compared with an average of 25 for the 39 business sectors comprising Vigeo's total research universe of 4,500 companies.

By comparison, insurance scored 27 for social issues management against 28 for the total universe. Only for managing governance issues did insurers (40) score better than the broad average (37).

Insurance Asset Risk will bring the topic of ESG integration and risk considerations for an insurance investment strategy in the US at its annual Americas conference in September.

Principles for Responsible Investment head of Americas Chris Fowle, one of the speakers at the event, said: “we’ve seen strong and increasing interest from investment manager subsidiaries of US headquartered insurance companies.”

“Given PRI’s focus on encouraging asset owner signatories to join the PRI we think a natural progression would be for general accounts of insurance companies to join PRI as asset owner signatories.  This trend is strong in other parts of the world where we have more than 50 such signatories”

Peter Uhlenbruch, investor engagement officer at the Asset Owners Disclosure Project (AODP), also a speaker at the IAR event, said Vigeo's findings mirrors his organisation's own research.

“However, as the influence of the TCFD framework continues to ripple throughout the global investment community, insurers are expected to face intensifying expectations to evolve their climate-risk methodologies by incorporating forward-looking risks via tools such as scenario analysis,” he said.

“We found that only 10% of global insurers are performing climate-related scenario analysis across their investment portfolios, reinforcing the message that insurers have a steep mountain to climb in developing robust and holistic climate-risk assessment approaches.”

Fowle and Uhlenbruch will speak at Insurance Asset Risk Americas 2018 in New York on 25 September. Click here for more information and to confirm your attendance.

Vincent Huck