Generali figured prominently in the ESG news agenda during late June as it closed its first sustainability bond and unveiled new targets to address climate change.
Notably, the Italian insurance group also secured €200mn ($238mn) of reinsurance cover through the latest issuance in its Lion Re catastrophe bond series.
The placement will provide Generali with cover against European windstorms and Italian earthquakes over a four-year period.
Although it is the third issuance in the Lion Re series, it is the first since Generali introduced its Green Insurance Linked Securities Framework early last year.
The deal has been billed as the first-ever green catastrophe bond sponsored by an insurance company.
The concept behind the framework is that the collateral will be invested in assets with a positive environmental impact, while transferred solvency capital will be allocated to sustainable initiatives.
Essentially, the freed-up capital will be used for green assets and underwriting, based on predefined selection and exclusion criteria.
Eligible assets for deployment of this freed-up capital include project bonds or equity investments, both for new and existing projects.
Capital freed up by the green ILS transaction may also be used to support eligible insurance contracts, which can include any retail and corporate P&C business which is intended to have a positive impact on the environment.
These can include products promoting responsible behaviour to decrease pollution, as well as products reducing the negative impact of climate change.
In its green ILS framework Generali has listed eligible projects under six main categories: green building, energy efficiency, renewable energy, clean transportation, sustainable water management and recycling, re-use and waste management.
A Green ILS Committee has been established to review projects for compatibility with the regime, with the committee including representatives from the group’s capital management, debt and treasury, corporate sustainability and social responsibility, investment governance, risk management, real estate, integrated reporting and investor relations teams.
An analysis of eligibility will be conducted to ensure compliance with the criteria, usually by the persons in charge of real estate and infrastructure investments or underwriting.
The identified projects are then subject to a second analysis by the Green ILS Committee, which will then take the final decision on the allocation of capital to projects.
Under the framework, projects which have already been allocated are re-examined twice a year to verify their continued compliance with the eligibility criteria.
Strengthened climate targets
The Green ILS framework is one component of Generali’s broader ESG strategy. Late last month the group strengthened its climate targets with a commitment to make €8.5bn to €9.5bn of new green and sustainable investments between 2021 and 2025.
New underwriting goals have also been introduced which include increasingly restrictive exclusion criteria for the coal sector.
The new strategy aims to fully phase out issuers which operate in the thermal coal sector in Organisation for Economic Co-operation and Development countries by 2030 and by 2040 in the rest of the world.
The carrier said it will engage at least 20 carbon-intensive investees in its investment portfolio by 2025 to drive real-world impact
Generali said it was also pushing ahead with its commitment to no longer insure upstream oil and gas activities.
“This includes the commitment to no longer underwrite risks associated with the exploration and production of fossil fuels from tar sands, from shale deposits (oil and gas) or extracted in the Arctic zone, both onshore and offshore,” the carrier said.
Generali has also updated plans for the decarbonisation of its group operations, with a new goal of being climate negative in 2040, with an intermediate goal of achieving climate neutrality by 2023.