Staff Writer
THE world over, business is battling to strengthen their portfolios to reflect their sustainability efforts as key stakeholders are carefully considering these issues in making business decisions.
It is no surprise that even investors have joined the que.
Investors have historically been primarily concerned with the amount of returns an investment has produced, and they have generally had mixed feelings about how those returns have been produced.
As things takes a new twist, the industry is seeing a drive towards responsibility in its stewardship of investor money, with investors seeking to understand how their savings are being invested.
As time progresses, it is emerging that sustainable business practices promote environmental responsibility, social responsibility, and economic growth.
By implementing sustainable practices, companies can reduce their carbon footprint, minimize waste and pollution, and conserve natural resources at the same time enhancing a positive reputation, customer loyalty, and attract a skilled workforce.
The major sustainability issues around the world can be broadly categorised into environmental, social, and economic challenges.
But how does the insurance industry fit into this matrix and how is it ferrying? There have been concerted calls for sustainable insurance by all industry players.
Sustainable insurance is a strategic approach which aims to reduce risk, develop innovative solutions, improve business performance, and contribute to environmental, social and economic sustainability
The need for sustainable insurance is what saw the coming into play of the Nairobi declaration as a commitment by African insurance industry to support the achievement of the UN sustainable development goals in 2021.
The declaration which was unveiled at the UN Environment Principles for sustainable insurance initiative 4th Africa summit now has the backing of over 160 signatories as it brings together senior leaders to accelerate solutions to major sustainability challenges.
Insurance24 understands that there has been some traction on this journey with most companies requiring capacity building on the ESG journey.
FSD Africa Assistant Risk and Resilience, Titus Kisenga told Insurance 24 that around 70% of these companies are at early stage of ESG.
“Since we started in 2021, we have seen a bit of traction in terms of how the industry is moving. First, we did a recent survey to the NDSI members, the Nairobi Declaration on Sustainable Insurance members, which is about 190 at that time.
“Quite a representation of African insurance industry players. And what we realised is that most of them, around 70% of them, are at early stage of ESG.
“But the willingness to learn about ESG and sustainability is there. So for them, what they were asking for or they asked for from NDSI was capacity building and learning and development on how they can start their ESG journey,” he said
Kisenga said for other advanced companies that have taken some steps on ESG, had gone ahead and started developing some sustainable insurance products.
These include Old Mutual and Prudential Plc.
“We’ve seen Prudential producing the report on their ESG performance. Others usually develop agricultural product, which is basically a sustainable insurance product because their continent is heavily dependent on agriculture, basically, “he said
But the journey hasn’t been without its own challenges.
Kisenga said some of the bigger challenges has been on how ESG is perceived, for example it has been as a way to control the business.
“We’ve seen some companies or signatories ask, so will we be required to stop underwriting certain class of business?
“For example, oil and gas, for example, which is usually termed as brown investment as opposed to green investment.
“Our answer to that has been no, we are not saying that you stop, basically, but we hope you to transition to a greener way of doing business, which in time it will be inevitable. We don’t want you to lose your business at that time when it becomes inevitable,” he added.
Kisenga said the other challenge has been basically the actualization of the climate finance, for example, in Africa.
“Sometimes we get bigger promises at bigger events, for example, at COP. The Global North usually makes a massive promise to support us in this journey
But actualization of those commitments has been a challenge, which makes us delay in terms of actualizing what we have promised to do. Then the other thing is the capacity within the insurance industry. We all know that ESG is still a new topic,” he added
Africa Ahead is one of the signatories to the Nairobi declaration since 2021.
Editorial director at Africa Ahead, Liz Booth said the Nairobi declaration in so many ways mirrored the aspirations of Africa Ahead.
Booth resonates with the fact that the declaration created a voice for African insurance entities.
“We’ve been a member of the Nairobi declaration since 2021, which was the year in which it was founded.
“We joined because we very much have the same aspirations, that if you can build a sustainable insurance market in Africa, you will enable the under-insured and uninsured to have access to insurance.
“I think what it’s done is it’s created a community and a voice for African insurance entities.
“There are some huge ambitions within the NDSI, in terms of product innovation, access to funding, working together, learnings, sharing of knowledge, and all of which are really worthy ambitions. I would encourage other insurance entities to become members,” Booth said.
Booth believes that it was just a matter of shifting the mind set and encouraging all your people be it in one’s business, clients’ insureds and all to actually think more deeply about the conversation and how they embed sustainability and resilience into the market.
