Lloyd’s will not be taking a prescriptive approach on managing agents’ ESG strategies, according to chief of markets Patrick Tiernan, but all syndicates will be expected to have a credible plan towards achieving net zero by 2050. 

Lloyd's climate change

For the first time, all plans submitted as part of the 2023 business and capital planning process will need to be accompanied by an ESG strategy. 

As he delivered this year’s annual market message to kick off the business planning process, Tiernan said the Corporation’s expectations will depend on the size and sophistication of managing agents. 

“We expect to see a range of plans submitted – a larger PLC is more likely to be in an advanced position,” he said.

“While we are not being prescriptive we are raising the bar and having no credible plans to achieve net zero by 2050 will not be acceptable.”

He said the Corporation would welcome efforts to develop solutions that enhance the transition towards a low-carbon economy.

“Short-term effects on energy pricing might evolve to impact energy policy in the medium term. Given our commitment to be the insurer of the transition, we will support innovation and require policy input when it comes to non-fossil fuel-based sources of energy as part of credible ESG plans,” Tiernan said.

Market engagement

At the start of this year The Insurer conducted the first independent survey of the Lloyd’s market’s ESG progress, with respondents representing more than 70 percent of market capacity taking part.

One of the key takeaways from the survey was the extent to which respondents are aiming to significantly enhance progress by the midpoint of this year.

For investment, more than half of respondents (53 percent) said they had already integrated ESG into their operations, with a further 38.5 percent planning to do so by 30 June this year.

For underwriting, less than 15 percent integrated ESG factors into decision-making at the time of the survey, but 63 percent said they would do so by the midpoint of 2022.

In its second ESG report, released earlier this month, Lloyd’s detailed some of its achievements to date, with a joint statement from chairman Bruce Carnegie-Brown and CEO John Neal describing 2021 as a “formative year in embedding our ESG plans across the market”. 

On an operational basis, Lloyd’s said it achieved a 12.5 percent fall in the average emissions per employee during 2021, and was planning steps to reduce the emissions of its London headquarters and implement a carbon management plan during 2022.

From an investment perspective, Lloyd’s said its focus for 2022 includes the launch of an impact investment fund which will deploy 3 percent of the Central Fund in investments supporting the net-zero strategy. 

The Corporation said it would also be looking to build out and implement its net-zero framework, which will include exploring the creation of a “reliable, scalable and transparent” carbon footprint measure as well as analysis around issuers’ net-zero credentials.

Activist criticism

However, the plans drew criticism from activists over the lack of a firm commitment around fossil fuel underwriting restrictions. 

Having stated in its first ESG report that it would be asking managing agents not to not provide any new cover for coal-fired plants, coal mines, oil sands and Arctic energy exploration from 1 January 2022, activists were critical of an absence of commitment in the latest report.  

“Lloyd’s of London has gone from a climate laggard to climate villain,” said Lindsay Keenan, European coordinator at Insure Our Future. “Lloyd’s new ESG report is a disgrace, with no positive attributes in sight. It exemplifies many of the worst aspects of corporate greenwashing.”

Maya Mailer, a campaigner with Mothers Rise Up who met with Carnegie-Brown said the Lloyd’s chairman had “assured us that Lloyd’s are doing their best to phase out support for fossil fuel energy but their best is not good enough”.

“My daughter is four today and has yet to start primary school. She will be 12 and beginning her secondary education before Lloyd’s stops insuring even the worst fossil fuel projects – coal, tar sands and Arctic energy. Lloyd’s can and must move quicker.”

Tiernan defended Lloyd’s progress to date, stating that “on commitment and leadership, we are walking the walk in my view”.

“People need to understand that Lloyd’s is a market and how we regulate the market depends on a number of factors, including competition and antitrust obligations,” he said.

“Inside the corporation, this is a big focus for us. It is core to our purpose.”