Insurance firms have ’duty to act ethically’ over green finance – CII

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The Chartered Insurance Institute has published a guide on how the sector can take action

Insurance professionals have a “duty to act ethically” when it comes to green finance, Alan Vallance, chief executive at the Chartered Insurance Institute (CII), said.

Green finance refers to a loan or investment that aims to benefit the quality and functioning of the natural environment.

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A key element of green financing, according to the United Nations Environment Programme (UNEP), is to “better manage environmental and social risks, take up opportunities that bring both a decent rate of return and environmental benefit, [as well as] deliver greater accountability”.

To support members of insurance and personal finance professions in this area, the CII published its Green Finance Companion Guide earlier this week (29 March 2023).

The guide explained how firms can incorporate green finance-related thinking into decision making, in addition to highlighting the need for role models in sustainability.

“Clients are increasingly aware and concerned about their impact on the planet and many firms in which professionals work have environmental, social and governance (ESG) policies that they expect their staff to uphold,” Vallance said.

“This companion guide seeks to help insurance and personal finance professionals understand that their responsibilities when it comes to green finance are part of their duty to act ethically and learn about how they can make a difference day to day to meet the needs of the planet, as well as the needs of their clients.”

Call to action

This came after a Lloyd’s of London’s Greener Industry paper (published in July 2021) said there was a “need to accelerate efforts” to direct capital towards climate positive solutions and products.

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“With more than $30tr (£24.8tr) in assets under management (AUM), the global insurance industry has deep pools of capital that if unlocked could be increasingly directed toward investments that drive climate positive outcomes in both developed and developing nations,” it added.

Market data provider Statista also stated in January 2023 that assets among global insurance companies rose to around $40.6tr (£33.6tr) in 2021 – an increase of almost $2tr (£1.7tr) in 2020.

The CII’s suggestions for greener financing included considering what an outsider would think of business choices and publishing a green finance strategy, which could sit under the umbrella of a wider set of ESG commitments.

Rebekah Clement, sustainability director at Lloyd’s of London, said: “Now more than ever, businesses and individuals are expected to play their part in tackling the far reaching issues facing society.

“Whether embedding sustainability principles deep within an organisation’s purpose or deploying our expertise, resource and aid in the face of a humanitarian crisis, the challenge remains constant as does the need for action.

“I hope this guide serves you well and encourages further collaboration as we continue our work to build a more resilient, sustainable and inclusive finance sector for the years to come.”