ESG Investment Survey

ESG Investment Survey

ESG refers to the use of environmental, social, and governance indicators to assess how many businesses and countries have progressed in terms of sustainability. These three metrics will be incorporated into the valuation phase when determining which equities and bonds to purchase after enough information has been analyzed on them.

ESG survey calculates the gap between the discerned importance & actual practice

Although the implementation of environmental, social, & governance (ESG) practices in the transfer of risk, reinsurance, including insurance-linked securities (ILS) sectors are viewed as quite significant. There is a clear difference between perception and actual reality, according to a recent survey we conducted with Synpulse.

We collaborated with boutique consultancy company Synpulse to perform a study in the third quarter of 2020 to assess the maturity of ESG in the insurance, reinsurance, ILS, and risk transfer markets. It was the first of its kind financial, social, and governance (ESG) survey, examining how risk transfer organizations had integrated ESG considerations into their policies and operations.

The complete findings are being presented, and survey members will collect detailed benchmarking details to assess their sophistication degrees in terms of implementing ESG policies and activities compared to their competitors.

 However, despite their importance, adoption and ESG activities might not be as advanced as you would expect, with just a a small percentage of survey respondents taking behaviour that reflects their very optimistic feelings about ESG. Various obstacles are seen as impeding ESG acceptance in the insurance, reinsurance, ILS, and risk transfer sectors, keeping back maturity and building this void.

First, the survey's findings indicate that several companies lack personnel devoted to ESG adoption, with no committed individual and little commitment to date. Non-dedicated ILS investment managers (i.e., more prominent asset managers who sell ILS strategies), including insurers, are, unsurprisingly, better resourced than devoted ILS fund managers.




Another roadblock to implanting ESG activities at the organizational level is a lack of well-identified, concrete targets in ESG strategies.

"Although A large percentage of those surveyed accept that observable ESG targets are being established, several of our people surveyed have expressed that they are either not described precisely enough even in ESG strategies," Synpulse clarified.

Participants in our survey were also questioned whether they are calculating their ESG footprints and there were evident disparities, with specific regions and traditional investment market participants lagging. Participants in our survey were also questioned whether they are calculating their ESG footprints and there were evident disparities, with specific regions and traditional investment market participants lagging.




"Most committed ILS fund managers and reinsurers will be speeding up their activities in this field by gradually including external players, which is a good sign."

According to Synpulse, 70 per cent of committed ILS hedge fund and underwriting respondents said that calculating their ESG output with an external ranking or the score was critical for their company. In the financial risk value chain, the third challenge was accountability and disclosure. Although 90% of respondents in our survey agreed that screening parties and components of risk inside the production chain against ESG parameters are relevant, it's unclear whether this is done in a meaningful way. Looking at reinsurance, retrocession, and ILS contracts to see covered company underlying and analyze how each insured party conducts business or accepts ESG presents considerable challenges. Although ILS, like insurance and reinsurance, has relatively positive ESG characteristics in providing catastrophe and more comprehensive insurance risk resources and the social good it offers, things get a little murkier if you look beneath the system itself. The farther down the risk transfer chain you go, the less transparent things get, with retrocession Aires frequently getting a good picture of the relevant insurance policies.



It will create unique challenges for the ILS industry since confident institutional investors, for example, need assurances that their contributions are not causing any social or environmental damage. However, ensuring that the underlying insured follows the same ethos is extremely difficult. As a result, a strict ESG review of ILS contracts will undoubtedly reveal multiple gaps, emphasizing the value of acceptance in the sector as end-investors become more concerned with ensuring their allocations are ESG compliant in all asset groups. As the legislation takes effect, especially in Europe, accepting ESG can become increasingly important for the ILS sector to maintain access to a diverse set of investors.

 There is still more work to be done, but the substantial perceived value of ESG signals that risk transfer, re/insurance, and ILS market players would strive for greater acceptance and sophistication of ESG considerations in their operations and decision-making.

 

   

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