ESG

In the latest episode of Prospective, The Insurer TV’s monthly flagship analysis programme, carriers have been warned that a failure to act now will likely become a reputational issue as calls to action grow.

Tom Dawson, partner at McDermott Will & Emery, told the programme there was now a “vibrant community” of individual investors, as well as asset managers, who wanted to know what companies were doing from a sustainability perspective.

He cited the example of Larry Fink, CEO of asset manager BlackRock, which oversees $8.7trn in assets, who has “served notice” on investors and boards to detail their ESG efforts.

Tom Dawson, partner, McDermott Will & Emery

“As more and more asset managers take that position, you will have to listen to people,” he warned.

“In the short to medium term, the immediacy of and the volume of rhetoric around climate change as a major factor in investment management is unmissable.

“This will change perceptions of the boards and management of companies who until now have stayed on the fence, and have as yet not announced the steps they are taking on the underwriting or investment side.”

European ESG Mutual Fund AuM

Dawson said there are a number of insurers with a “lukewarm policy” towards climate change that will face reputational risk if they do not act.

Andy Ponsford, head of insurance and funds UK, Corporate Bank at Barclays, defended the insurance sector’s track record on climate change engagement, citing initiatives such as ClimateWise, established in 2007, as well as the Principles for Sustainable Insurance, founded in 2012.

“Many insurance companies now have increasingly sophisticated infrastructure towards achieving ESG goals,” he said.

Ponsford said it was important for insurers to embed ESG “horizontally and vertically” across their organisations, improving analysis and modelling and then feeding this into enhanced decision-making and reporting.

Andy Ponsford, head of insurance and funds UK, Corporate Bank, Barclays

On the investment side, he said awareness was growing of the importance of ESG factors as a component in long-term stock selection.

Marcus Rivaldi, managing director for analytics at Twelve Capital, said the ESG investor community was rapidly expanding, with PwC data showing that ESG-labelled funds grew at double the rate of traditional funds between 2012 and 2019.

He said embracing ESG would bring benefits to carriers both in terms of attracting capital and through valuation benefits.

Susan Barron, global head of green and sustainable capital markets at Barclays, said an increasing number of investors and issuers were now looking to integrate ESG in both investment decisions and broader corporate strategies. 

Susan Barron, global head of green and sustainable capital markets, Barclays

“We have seen significant growth in ESG in recent years which has come to the fore in a number of different investment trends,” she said. 

“We’ve seen more and more investors and issuers looking to integrate ESG in both investment decisions and broader corporate strategies.”

Barron said positive fund flows in both fixed income and equity markets were likely to continue moving forward.

“We’ve also seen growth in the number of dedicated ESG funds that continue to be established, driven by and supported by policymakers, regulators and other market stakeholders.

“We would expect to see this growth in ESG investments and AuM continue and most likely accelerate in the years to come.”

European-ESG-Mutual-Fund-AuM-by-theme-(EUR-bn)

Click the link below to watch the latest full episode of Prospective, in which we focus on ESG – a defining feature of the insurance landscape in 2021…