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Insurers ramp up concerns over greenwashing amid stricter ESG standards
A recent global study has shed light on the growing apprehensions within the insurance industry regarding greenwashing, as environmental, social, and governance (ESG) criteria become more rigorous.
Insurers ramp up concerns over greenwashing amid stricter ESG standards
A recent global study has shed light on the growing apprehensions within the insurance industry regarding greenwashing, as environmental, social, and governance (ESG) criteria become more rigorous.
The research, conducted among investment management professionals across life insurers, London Markets (re)insurers, and investment managers catering to insurers, was released by Ortec Finance, a renowned specialist in risk and return management solutions for the financial services sector.
The findings reveal that almost half (45%) of the respondents are very concerned about the level of greenwashing present in investment opportunities. Furthermore, an additional 53% are somewhat concerned about this issue. This widespread concern comes at a time when institutions are planning to expand their portfolio allocations towards green bonds and specialist climate-focused funds within the next two years, with 62% intending to increase allocations to green bonds and 75% to specialist climate-focused funds.
Despite these planned increases in green investments, there is an underlying fear that the pool of available investment options will diminish in the coming years. This is attributed to the tightening of ESG criteria, with around 80% of those surveyed anticipating a reduction in available investment opportunities due to ESG requirements. Among them, 9% foresee a dramatic decrease in the range of investments accessible for this reason.
Moreover, there appears to be skepticism about the effectiveness of current ESG strategies and programmes within the industry. Only a slim percentage (18%) of the respondents believe that the industry at large has very good ESG strategies and programmes in place. This figure slightly rises to 21% when enquiring about the strategies and programmes within respondents' own organisations.
Addressing the concerns, Hamish Bailey, Managing Director UK, and Head of Insurance & Investment at Ortec Finance, said, "There is strong demand among insurers and insurance asset managers for specialist climate-focused funds and green bonds." He highlighted the clash between this demand and the rising alarm over greenwashing, as well as the expectation that investment opportunities will become scarcer as ESG requirements intensify.
Bailey further stressed the growing need among insurers for support in identifying worthwhile investment opportunities that satisfy both institutional needs and ESG criteria, necessitating a more stringent approach to combating greenwashing.
Ortec Finance is poised to aid insurers in navigating these challenges through a wide array of services. These include asset liability management, asset allocation, risk management, economic scenario testing, and performance measurement and attribution. The firm aims to equip insurance companies with the tools needed to manage complex liabilities, address low yields, and fulfil increasing demands for investment performance analysis, all while assessing risks and opportunities linked to climate change.
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