LIVE: ESG IN INSURANCE Conference, Vienna

Today takes place in Vienna, at the historic Bristol Hotel, the first ESG IN INSURANCE Conference. Organized by XPRIMM, and with Vienna Insurance Group as Official Partner, the event benfitted also from the support of the Turkish IUC Group.

Read here the main statements.

Prof. Karel van HULLE, KU Leuven - Goethe University Frankfurt, Germany

• We are actually talking about the survival of the planet; it is important to learn about ESG and also learn about how to raise awareness.
• ESG is very much about change of mentality and today we will talk about how the insurers should get involved in this change.

Pamela SCHUERMANS, Principal Expert Insurance Policy, Lead of EIOPA's inter-departmental ESG group, EIOPA

• When addressing ESG risks there are challenges but also opportunities. The need for mitigation and adaptation of and to climate change was never stronger than now.
• The risk of greenwashing is increasing. The race is on in the clean investments, to foster green transition; the insurance industry has a balance sheet of about 8 trillion, but only about two of them are assets invested in a green way
• If we do not adapt properly to climate change, we will se a lot of inequity arising
• Implementing a risk based approach to sustainability is EIOPAa??s goal; in the longer term, disregarding sustainability will come back against the balance sheet
• Since the summer 2022 re/insurers are required to integrate sustainability in their reporting by having a look at their investments impact on sustainability goals; non-life insurers are also required to disclose their productsa?? impact on mitigating climate change effects
• Today only about a quarter of the damages caused by nat cat is covered by insurance, which leaves the rest to be covered by governments of further impoverish populations
• CSRD is a directive that still needs a lot of improvement and completion, but it provides the basis for our future work for building sustainable finance

PANEL
Dieter PSCHEIDL, Head of European Affairs, VIG - Vienna Insurance Group, Austria;

• European legislator was extremely active starting 2018
• We need a reliable European database of companies; tens of thousand of companies will have to make a full disclosure of their carbon footprint
• The disclosures on the retail products are still on the dark side of the legislation a?" the European legislators are somehow at fault as the regulation still includes a lot of inconsistencies
• Governance per se has been addressed in insurance already for decades; at VIG we have a strong focus also on S, especially for affordable housing

Pamela Schuermans, Principal Expert Insurance Policy, Lead of EIOPAa??s inter departmental ESG group, EIOPA 

• ESG is a global issue a?" ESG risks dona??t stop at the borders; I have never seen a larger cooperation than the one on the sustainability issues;
• S and G are also crucial for achieving sustainable developments; S is very much related with the national legislation on work, retirements etc. which means there is an additional layer that needs to be integrated in a consistent manner.

Ilijana JELEC, Deputy President of the Board, HANFA and Member of IAIS Audit and Risk Committee, Switzerland)

• According to PWC 75% of investor agree that ESG goals need to be incorporated into the investment criteria event if they lead to a decline in profitability on short term a?" that means for me that there is an increasing awareness
• CEE countries, although less developed than the Western ones in insurance business terms, need to follow the ESG a??discussiona?? and to adapt as much as possible and progress.
• We are currently very preoccupied by the E in the ESG a?" most probably because climate change gives a sense of urgency -, but S and G are equally important

 

Liane HIRNER, CFRO Vienna Insurance Group

• Top 4 global risks concern the environment: failure to mitigate climate change, failure of climate change adaption; natural disasters and extreme weather events; biodiversity loss and ecosystem collapse
• Climate neutrality of the EU by 2050 requires the first transition plan by 2025 on how to reduce CO2 emissions to zero until 2050
• Insurers are important providers of capital for national economies a?" as such, they can make a significant contribution to a sustainable future
• Insurance is a susitanable business by default, because it provides the means to increase resilience
• Insurers are the largest institutional investor in Europe - Investment volume about 10.5 trillion euros
• Sustainability is a strategic matter for VIG a?" we want to actively participate in building a future wort living
• VIG increases investments in renewable energy and green bonds
• Increase of investments in renewable energies/green bonds - Portfolio volume Green Bonds 2022: EUR 829 million (almost doubled compared to the previous year)
• Withdrawal from coal energy: direct coal investments -57% until end of 2025 and 0% by end of 2035; no new policies for coal-fired power plants since 2019; reduction of coal risks in corporate business by 70 % compared to 2019
• Sustainability Bond 2021 EUR 500 million  - we have launched the first insurance benchmark sustainability bond in Europe;  currently, 80% of the Sustainability Bond is invested in green projects and 20% in social projects
• VIG  manifests a strong social commitment a?" focus on affordable housing
• In VIG view, sustainability means to create economic value today withought doing so on the expense of tomorrow

Felix BEGUN, Mathematician for insurance and pension supervision, ESG Expert FMA, Austria

• FMAa??s objectives in sustainability terms are: insight into our market and an overall view from a supervisory perspective; identify possible issues which might affect the undertakings assets in the future; incorporation of the results into our supervisory process and risk scoring. We aim to have a leading role in sustainability assessments
• Austrian insurersa?? asset allocation consists 18% in government bonds, 24% corporate bonds, 25% equity, 9% property etc; there is still a a??slicea?? of  about 12% placed in investments funds without look-through
• 21.6% of assets are invested in Climate Policy Relevant Sectors
• Based on scenarios from the NGFS (Network for Greening the Financial System), which assume an increase in carbon prices over three years (2030 a?" 2032) in order to achieve the targets of the Paris agreement, it sems that a sudden and sharp increase in carbon prices is assumed due to delays in the respective measures to reduce carbon emissions and to make fossil less attractive;
• sage of ESG scores provided by an extern provider, for all assets where ESG scores were available, 96.3% were Equities and Corporate bonds. For the overall Austrian market, ESG scores were generated for 29.8% of all Equities, Corporate bonds and Structured notes; One should note that the analysis only includes assets with existing International Securities Identification Number (ISIN)
• Last yearsa?? experience shows that data granularity and data quality may be an issue, while most analysis methods require additional parameters that are not included in the regular reporting

Prof. Ksenija DENCIC-MIHAJLOV, University of Nis, Serbia & Ostfalia University of Applied Sciences, Center for Scientific Interdisciplinary Risk and Sustainability Management, Germany

Klime POPOSKI, CEO, Winner-VIG and Prof at St Kliment Ohridski University, North Macedonia

• Despite increasing interest from policy makers and financial regulators, studies relating to the insurance industry are still scarce
• EU Commission action plan on financing sustainable growth includes three main features: reorienting capital flows towards a more sustainable economy; mainstreaming sustainability into risk management; fostering transparency and long-termism
• While large undertakings shall include in the management report a non-financial statement containing information on sustainability issues, there is no clear standard on these reporting requirements
• The research performed showed that European top insurers disclose, on average in the period 2016-2021, against 47% (69%) of the analyzed SPDI (EPDI) parameters respectively. Also, progress in the disclosure rates has been modest but constant
• In the same group, of large insurers, there is a gap in sustainability reporting practice between analyzed insurance companies and also p in reporting practices between the E and S components
• In the CEE markets, overall sustainability disclosure is still insufficient; however, evident growth in the values of sustainability performance disclosures during the Covid pandemic period. There is a gap in sustainability reporting practice between insurance companies operating in the region, with Slovenian insurers being regional leaders in the sustainability disclosure practice.
• The further development of the research, that will be officially published later this year, investigates the ESG reporting in the CEET region a?" a region which is not homogenous, nor in regulatory terms or in governance terms etc.
• Some of the main findings of the survey are that in general is missing a national sustainable strategy; non-EU countries should work on creating the regulatory standards, as well as acquiring the necessary expertise; ESG is still not a top priority for the regulatory bodies, especially in the non-EU countries.

Doris PA-PPLEIN, Senior Sustainability Analyst, Swiss Re 

• Swiss Re sees as its mission to make the world more resilient
• The groupa??s main ambitions are advancing the net zero transition by committing to decarbonization pathway, setting emission reduction targets for assets, liabilities and operations
  providing risk transfer solution and investments to advance the net-zero transition; and building societal resilience by climate adaptation and disaster resilience complemented by financial inclusion and healthcare protection; narrowing the nat cat protection gap; fostering financial inclusion with focus on household financial protection and healthcare protection
• Swiss Re is abstaining from doing business with entities that cause irreversible damage to the environment and ecologically sensitive areas; complicit in severe human rights violations; poor corporate governance and behaviors
• Actions re/insurers can take, especially on the underwriting side, concern reducing the Nat Cat protection gap by raising awareness, providing accessibility and affordability

Dr. Annina ANGSTMANN | Head P&C Solutions NCEE | Director | Swiss Re Solutions

• Re/insurers should operationalize their sustainability ambition down to the point of underwriting
• Swiss Re Reinsurance Solutions can support insurersa?? journey in three main areas: transitions risks, ESG and SDG and physical risks
• Economic and social activities have an impact on the present and future state of ecosystems - a negative impact will lead to a reputational loss
• Intact ecosystems help companies generate economic value and contribute to the human well-being, and the risk of an adverse development of the ecosystem leading to economic losses should be considered

Süha ÇELE, COO and Member of the Board, Eureko Sigorta

• TA?rkiye ratified the Paris Agreement in 2021 and updated its reduction target for 2030 by increasing it from 21% to 41%. It also set a zero emissions target by 2053. The publication of the Climate Law is awaited.
• Financial Institutions have a unique opportunity to enable, support, and track decarbonization; pioneers may benefit from increased profitability, industry recognition, and higher quality green portfolios in the medium- and long-term
• Eureko Sigorta ais to become a strong SDG supporter
• Indirect emissions a?" mostly related to the companya??s clients, account for about 95% of the carbon footprint
• One of the actions an insurer may take is to assist its clients in improving their carbon footprint instead of just refusing to underwrite the risk a?" that woud help both business and advancing on the transition path
• The Partnership for Carbon Accounting Financials (PCAF) guides insurance companies on measuring emissions associated with financial activities, as the starting point for financial institutions to manage risk, identify opportunities associated with greenhouse gas emissions and to begin their journey towards decarbonization

Mojca ROME, Sectoral Secretary, Insurance Supervision Agency of Slovenia (AZN)

• The demand for and offer of sustainable investments is rocketing
• Existing EU policies provide the basis for defining greenwashing and unfair green claims, but greenwashing is a complex and multifaceted issue as it can generate reputational and financial risks
• (Current) Legal Requirements and Definitions of Greenwashing include: Taxonomy regulation; SFDR Level 2 etc; there are several definitions, not always consistent one with the other
• The drivers of Greenwashing Risks a?" from CfE-, are: growing demand for sustainability-related products; rapidly evolving regulatory regimes; sustainability-related product offerings; data availability limitations; labelling schemes fragmentations; gaps in skills and expertise; differing terminologies and interpretations of key concepts, etc.
• Possible Greenwashing Practices may include: vague or unsubstantiated claims about their products' environmental benefits, without providing any evidence to support these claims; using selective data while ignoring information; misleading labels; irrelevant claims etc.
• In order to avoid greenwashing, all stakeholders should play an active role in the verification of all claims made by insurance companies, investment firms, banks, rating agencies, auditors, analysts, third party service providers etc, despite the fact that it is not a simple task

Mojca ROME, Insurance Supervision Agency of Slovenia (AZN)

• Greenwashing may be avoided especially providing strong education, so the greenwashing risk may be mitigated at societal level

Doris PA-PPLEIN, Senior Sustainability Analyst, Swiss Re

• The difficulty is how we translate research into reality.

François Coste, CEO, GROUPAMA Romania

• It is not an easy task to develop sustainability, at least in Romania a?" on one side the country is still in a consumption stage and, on the other hand, the country is a factory for Europe
• We are trying to approach eSG issues in my company, but in a difficult market you need to carefully balance the ESG goals and the risks of loosing business
• Profit is not an option a?" we need it for strenghtening the company, but one should acknowledge that in a mutual company, as Groupama, is a little easier to put the clients in the center of activity
• It is very important to look to sustainability reporting not as to a beaurocratic task, but as to an opportunity to assess progress and the need of improvement; if the reporting is done wrongly, there is a reputational risk involved.

Michael Brandstetter, EU and International Affairs, VVO

• We are in a process and each step is important; in Austria, insurers are very committed to the ESG goals. We have refined enough the theoretical background and we have really reached the time for acting a?" some of solutions may prove wrong or not effective, but legislators should take advantage of these tests with reality to improve regulation
• An excess of regulation is a real risk, but we need to understand that we are dealing with a complex concept and mistakes are part of the evolution; as we advance on this path and maintain a fair and transparent dialogue between all stakeholders, anything may be improved