I was honoured to present to the General Association of the German Insurance Industry, earlier today – on behalf of Mr. Gautam Boda, Group Vice Chairman, JB Boda & Co. The GVNW represents the interests of the German insurance industry and advises them in the various areas of insurance cover. Needless to mention, in addressing the Climate Crisis the money pipeline ought to be addressed, too. Insurance is an important component of this pipeline.
Metaphorically speaking the business climate in India is in a state of flux and will only intensify. Going forward the key driver will indeed be #ClimateChange. What makes this a fascinating subject matter is the fact that several inter-related triggers are together driving it into a systemic zone. The ongoing blending of emerging risks is creating a heady concoction. It is thereby nudging risk management to overcome its myopia, self-imposed limitations, reactive methodologies and reliance on the retrospective. Leveraging the emerging systemic risks calls for imagination, adaptive practices and all-round resilience – so as to anticipate new demands of this marketplace and arrive at a win-win outcome. The presentation endeavoured to chart this path.
Praveen Gupta: Do you expect enough women leaders at the COP26?
Maria Alexandra: No, there are not enough women leaders attending the COP26. And whenever they are, they tend to be diminished in the shadow of the white male representation. I often get demotivated or even saddened with the fact that I join climate advocacy negotiations in rooms full of white men. And I remember that I need to get over my temporary feelings, to still be part of the decision-making process. However, the most stringent issue for me regarding COP26 representatives and leadership is not necessarily the gender imbalance, but the lack of correct representation of the world’s nations. This year’s COP not only highlights the utter inequalities amongst the countries, but also the obstacles to the delegations coming from the Global South countries and perhaps most importantly, from the indigenous communities.
PG: Why must we have an equitable representation of women?
MA: In order to ensure a fair (emphasis on fair) decision-making process, both during the planning and implementation phases, we must take into account everyone – as the UN’s agenda itself follows the motto ‘Leave no one behind’. However, most of the times, as the crucial decisions are taken behind closed doors, between mainly male representatives, they do not reflect the voices of those coming from the underprivileged communities – Small Islands Developing States (SIDS) and Least Developed Countries (LDCs). They also do not have the magnitude of voices that the US, the EU and the big ‘actors’ have. Our role, as climate advocates who are privileged enough to assist either the preCOP26 or the COP26 negotiations, must use this privilege to speak up on behalf of those underrepresented or undermined. And this leads me to highlight an eye-opening experience as a delegate to the preCOP26 this year in Milano.
PG: Any first-hand lessons from the Youth4Climate event?
MA: The Youth4Climate summit served as a prelude to the preCOP26, and as a young delegate of Romania, my country of origin, I got a chance to speak up my mind and represent the reality of a country that is often not widely known: the improper educational structure that generates enormous gaps in people’s behaviours and the ‘survival’ mode of my people. When I talk about ‘survival mode’ I talk about people who struggle with poverty, lack of financial means to ensure a decent living, lack of perspectives for their future, working each day simply to provide themselves the basic means of subsistence.
Both at the Youth4Climate and PreCOP26 summits I understood that the reality of my country is often reflected in so many others… and in most of them, the situation is even worse. One of the main topics that we addressed during our preCOP26 negotiations with the world leaders, as youth climate advocates, was the topic of ‘loss and damage’.
The climate crisis has gone, unfortunately, so far that multiple countries from the Global South are fighting its consequences on a daily basis: severe droughts, floods and heavy rains that impact to an enormous extent their agriculture and food production. In short, these countries’ climate change consequences are so severe, that their lives are completely affected by them: no more subsistence means, such as food or clean water and the urgency for displacement has gone extremely high. Amidst all this, these countries are paying for the consequences of a climate crisis that they have neither produced nor triggered. It was actually the big polluting countries, developed nations, that under the Paris Agreement are expected to pay up according to the Rule Book.
At the preCOP26, as youth leaders, we saw the governments standing up and pledging their financial promises to developing nations, SIDS and LDCs. But they continue to be reluctant. I remain hopeful and I am charging myself for some full days at the COP26. I know exactly where I will stand as a woman youth climate advocate, speaking up on behalf of those whose voice was not given the privilege to attend the summit. And that underlines a big problem – the voices that must be heard should be urgently given a fair opportunity to have a seat at the decision-making table.
PG: Best wishes in your efforts towards reinforcing the voices that must be heard and should be urgently given a fair opportunity to have a seat at the decision-making table.
Published in Bimaquest, September 2021
‘Riskier times ahead for the Risk Carrying Business’ – is what lies in store for the business of insurance – unless it acts seriously and urgently on the Climate Crisis front (Bimaquest, September 2021).
‘Despite increasing pledges of action from many nations, governments have not yet made plans to wind down fossil fuel production’, says a UN report. ‘The gap between planned extraction of coal, oil and gas and safe limits remains as large as in 2019’, when the UN first reported on the issue. The UN secretary general, António Guterres, called the disparity “stark”.
A report, produced by the UN Environment Programme (UNEP) and other researchers, found global production of oil and gas is on track to rise over the next two decades, with coal production projected to fall only slightly. “Fossil fuel production set to soar over next decade”. Countries plan to produce around 110% more fossil fuel than would be compatible with a 1.5C temperature rise by the end of this century (Mark Campanale).
Ironically, as Wolfgang Kuhn, CFA highlights: “Insurers say the solution is not to penalise brown investments but create a greater supply of green assets.” And all we have in terms of time, warns renowned climate scientist Michael Mann: the “lag” between halting CO2 emissions and halting the rise in global temperatures may be as little as three to five years.
Businesses, as a rule, do not like being forced to do anything – reminds Brett Ryder of The Economist. They prefer to make voluntary gestures – just enough to keep governments off their backs. Right now they are throwing around promises to cut carbon emissions to “net zero” like confetti… On the one hand the UNEP bares it all but the @UNEP FI initiatives for financial institutions remain toothless.
Peter Bosshard points out a serious disconnect: “of the 5 new Net Zero Insurance Alliance (NZIA) members, only @NN_Group has a strong coal exit policy. #HannoverRe is still covering coal through treaties, and none of the others have taken any steps to pass this low bar”.
‘Offsetting schemes are pure #greenwash so that fossil fuel companies can continue to do what they’ve been doing and make a profit’. Jennifer Morgan of Greenpeace has called for their immediate abolition. All this would not be possible without the money pipeline and the hypocrisy of banks, insurers and asset managers actively involved in this space.
The disconnects, double standards and skullduggery et al make insurers’ case as agents for a green transformation increasingly challenging. Before the existential issues assume a more threatening and irreversible form for them, reputational risks are already in play!
Praveen Gupta: Are there enough women at the COP 26 leadership, in your opinion?
Benedicte Herbout: To be completely transparent, I had not even really checked before you asked me. I just took for granted that it won’t be many, and in fact it is not. I would have been positively surprised if it had been the case though. Fact is, the COP is structured to represent all the parties – a majority of which don’t manage to reach gender equalities in their own countries.
What does comfort me (a little) is that the advisory team seems to be balanced – and in the end, advisors are often listened to. However, while I believe there are gender balance issues in the leadership team of the COP26, what is more problematic to me is the lack of representation of women from low-income countries. Women are suffering the most from climate change, low-income countries will suffer the most from climate change and so women in low-income countries are on the front line. Are they being listened to? I doubt it – we don’t even listen to the (wealthier) (male) scientists.
In addition to low-income countries’ women, we miss the youth too. They/we (I’m 27) are living and will live the consequences of years of inactions. We need to adapt and fight to avoid the worst and adaptation strategies need to take into considerations the views of the most affected. I fear the COPs are just meetings where the elite talk a lot – empty words otherwise we would have seen the difference.
Maybe, maybe, if the leadership of COPs were made of people who can’t fly away from climate change, things would change, action would follow. So I am bit unsure about to answer in the end. I am frustrated that one still asks this question – it should be given, so we can focus our energy on listening to who will suffer the most and act consequently.
PG: Why is it critical to have their voice?
BH: What is critical to me is not only this representation of youth, women, low-income countries balance. What is critical is that so many of us don’t really understand climate change. I mean the scientific mechanisms behind it. There is no climate education curriculum that tells you how all this works and why and that hinders any action. One can’t solve a problem if one does not understand it.
That is why I am cycling to the COP26 and facilitate Climate Fresk workshop on the way. While many ask whether it is also to make a point as a solo traveler woman, I actually never thought of it that way. I just want to popularise climate science and make people aware that we in Europe are highly privileged, and blind to consequences that climate change have on all of us, affecting some more. Listening to science is the first step to act, which then makes clear that we need to act all together. For the youth, for the low-income people, for the women.
PG: What are you eventually trying to achieve?
BH: My goal? Re-unite people from different political and economic backgrounds behind science, so that climate change can be treated with a common scientific understanding and solutions pragmatically debated and implemented.
PG: Happy cycling and may you realise your dream, Benedicte!
Honoured to chair a very stimulating panel discussion, earlier this evening. Delighted that BIMTECH considered evolving the Natural Catastrophe forum into a #ClimateChange theme and the esteemed panel was in concurrence to call it what has now become a full blown #ClimateCrisis! Hoping that this will metamorphose into a standalone event, soonest.
Coming from Reunion Island & living in Mauritius, Aurélie is intensely sensitive to the fact that: “We are going to see a lot more serious disasters striking us in the future. We have to keep in mind that rising sea levels will have huge impacts on tourism, a pillar of our islands’ economies. It is, therefore, imperative to reinforce the existing legal framework all together with the adaptation projects on the ground. We must not forget that not only material damages can occur but that down the line people’s lives are at stake.”
Women…again!
”Last year, the British COP26 host team found itself in trouble for not addressing gender imbalances in politics when announcing an all-man team. Women involved were to be working at a more junior level on subsections of the negotiations. This created a wave of indignation and more than 400 women in international leadership denounced it”, tells me Aurélie . #SheChangesClimate stood for inclusivity, transparency and accountability to the COP negotiations on the climate crisis, campaigning for a #5050Vision, reminds the jurist. Even though (little) measures to rectify the situation have been taken, the whole story brings shadows on the ability of the UK to truly stand up to the spirit and challenges of climate change, which, in return, doesn’t sound very appealing nor hopeful for the outcome of the COP, she believes.
The ugly truth
This faux pas might sound like an epiphenomenon, but it appears unfortunately as a lieu commun, and even more so as a painful truth. The lack of representation of women in the climate negotiations is paradoxical and unfair, particularly when one considers the importance of women on the ground. Indeed, women are change agents: they identify what must be done and can take necessary measures to make it happen. Moreover, they are the first to be directly and seriously affected by climate change and they are far more at risk. This message from Aurélie is a reinforcement of what the other women leaders have been saying again and again.
The IUCN study “Gender-based violence and environment linkages: the violence of inequality” from 2020 shows how the degradation of nature has a complex linkage with gender-based violence, she highlights. Their integration in the climate processes represents chances of success and will ensure fair decision making. Despite these facts and arguments, we notice that women are still not represented enough in high-level circles. During the 2019 COP25, only 21% of the 196 heads of delegations were women. Yet, diversity is the way forward if we’re ought to achieve the climate targets, let alone to stay truthful the Paris Agreement’s spirit! One legitimately may ask: is justice so blind? Well…Not quite, believes Aurélie.
What does the legal framework do about it?
Indeed, the actual legal framework is not bare on gender considerations. Women participation and representation in the negotiations process is a concern since 2001 (see namely decisions 36/CP.7, 1/CP.16, 23/CP.18 of the COP). Although rather poorly equipped on the matter, The Paris Agreement (PA) recognises the need for gender equality and empowerment of women under the scope of human rights in its Preamble. Articles 7 and 11, as well as the Katowice Climate Package also contain references to capacity-building and gender-responsive adaptation action, she opines.
In fact, a cornerstone has been established under the United Nations Framework Convention on Climate Change (UNFCCC) when the Lima Work Programme on Gender (LWPG) was established and extended by the COP (see Decision 18/CP.20 & Decision 1/CP.21), shortly followed by the first gender action plan (GAP, see decision 21/CP.22). Considering the need to address the challenge, COP25 adopted the enhanced five-year LWPG and its GAP (see Decision 3/CP.25), which aims “to advance knowledge and understanding of gender-responsive climate action and its coherent mainstreaming in the implementation of the UNFCCC” at all levels, reminds Aurélie.
The UNFCCC Secretariat publishes an annual report on gender and climate change to assist the Parties in tracking their progress. The last report unveils a slight improvement, asserting that “the representation of women in Party delegations increased by 9 per cent and among heads and deputy heads of Party delegations by 12 per cent”. Unfortunately, it also points out that “Despite these increases, women remain the minority, representing 49 per cent of Party delegates and 39 per cent of heads and deputy heads of Party delegations.” She alludes to the Report by the secretariat (FCCC/CP/2021/4, 20 August 2021, p.8. available online).
Human Rights Based Approach, next?
While the data shows that the situation is not as gloomy as it seems to be, however, perseverance and determination are more than needed to become structural. This is the real challenge. Of course, actions can be taken to ensure strict equality, but I believe we must address the problem in a sensible manner and see the big picture. This is the reason why a human rights-based approach (HRBA) perfectly makes sense and should be at the very core of all law-making processes in environmental matters. HRBA allows decision making to consider a broad variety of interests while keeping an alert eye on vulnerable groups that need specific attention, is her prescription. If everything is interconnected, inclusivity must be the pathway to achieve climate goals, SDG’s, and human rights. Aurélie concludes with a quote from one of her favourite authors – Victor Hugo – “To put everything in balance is good, to put everything in harmony is better.” Such pearls have got to come from a woman leader!
Praveen Gupta: Insurers have a responsibility to ensure that their decisions do not contribute to the very risks they are insuring against. They have a responsibility to protect people and planet. However, are ensuring they are not fuelling future climate changes?
Sonia Hierzig: Insurers indeed should have a responsibility to ensure that their business activities do not fuel climate change – after all, it is a risk that could cost the industry billions. A recent report by Swiss Re predicts that climate risks could add over USD 180 billion by 2040 for property insurance costs alone.
Considering this, it is baffling that most insurance companies still seem happy to invest in companies or provide insurance for projects that continue to fuel this crisis. Insure Our Future’s most recent scorecard on insurance, fossil fuels and climate change found that particularly insurers in the US, East Asia and the Lloyd’s market continue to support this sector with few restrictions – despite its clear incompatibility with the goals of the Paris Agreement.
There is a clear inconsistency here. Even if an insurer is not convinced by the moral argument of doing the ‘right’ thing and has little interest in the impact its business activities are having on people and planet, there should still be a very clear financial incentive to act – yet, this is still not taken seriously by many insurers.
PG: In your recent report ranking the world’s 70 largest insurers, you found them seriously wanting. Almost half of the insurers surveyed received the lowest rating?
SH: This is right, 46 per cent of the insurers we surveyed were rated ‘E’. This means that evidence suggests poor management of material risks and opportunities linked to the topics we assessed, including climate change, biodiversity, and human rights. Although there were also some insurers that performed better, not a single one was placed in the top two categories (‘AAA’ or ‘AA’), which shows that even the leaders still have much room for improvement.
There is some reason for hope though: overall, insurers performed best in our questions on ‘Governance’. Many are starting to put in place the right structures internally that should then enable them to improve their performance on various thematic areas; for example, by linking executive remuneration to climate- or wider sustainability-related targets, allocating clear responsibility to board members and providing adequate training and resources. We also found that 13 per cent of analysed insurers have made some kind of net-zero commitment.
This is positive and things are going into the right direction, but the concern remains that all of this is still happening far too slowly, and that we are running out of time. On climate change in particular, the time for adjusting governance structures and making big long-term promises on net-zero really was yesterday, and we need insurers now to jump straight into action.
PG: Do you see any marked contrast between the underwriting and investment policies of the insurers studied by you?
SH: Yes, there was quite a contrast. Performance on investment is generally better than on underwriting for insurers with a P&C business. We found this quite surprising, considering it is the core role of the insurance industry to manage uncertainty and thus enable their clients to take greater risks than they perhaps otherwise would. One might expect that the types of systemic risks we explored would be an essential part of the analysis that feeds into development and pricing of products. This does not appear to be the case – instead, insurers’ approach in terms of their investment activities is more advanced.
One reason for this might be that insurers have been able to learn from other asset owners and asset managers how to incorporate ESG issues into investment decisions and have benefitted from the general mainstreaming of sustainable finance, while the underwriting side requires a much more insurance-centric approach.
PG: Are you enthused by the creation of the Net-Zero Insurance Alliance (NZIA)?
SH: Well, considering the relative lack of progress on the underwriting side, this new Net-Zero Insurance Alliance indeed seems like good news. More focus on underwriting activities is sorely needed. Generally, I think the willingness among financial institutions to collaborate and share knowledge on sustainable finance issues is quite commendable.
I am, however, a little bit cautious and don’t want to be too jubilant just yet: so far, the initiative has mainly set ambitious targets, but many questions remain around how they will be implemented. From our conversations with insurers, it seems obvious that no one yet clearly knows what it means to be a net-zero underwriter, and the Alliance leaves much to the signatory companies’ discretion. So, as usual with such initiatives, the proof will be in the pudding.
PG: How are insurers performing on the Environmental Societal and Governance (ESG) scale?
SH: Climate change is definitely the slightly more established topic, while consideration of other ESG issues is still relatively nascent. Some insurers have started to consider human rights, with just under a third now having some kind of human and/or labour rights policy. We hope that more insurers will start to follow this trend: so far, most of the world’s largest insurers still show severe negligence of their impact on human and labour rights.
The least well-covered topic of those included in our survey was biodiversity. The vast majority of assessed insurers have not yet developed an approach to managing nature-related risks to their portfolios and show little understanding of how their investment and underwriting activities are affecting, or may be affected by, the biodiversity crisis. This topic has close linkages with climate change, and so we hope the fact that more is being done on climate, as well as the upcoming Convention on Biological Diversity, will increase insurers’ awareness of this issue and inspire action.
PG: How can regulations be made more conducive to facilitate the desired transition?
SH: At ShareAction, we actually recently published a briefing which explains what policymakers can do, particularly within the context of the EU and the upcoming review of Solvency II. In particular, we make seven key recommendations:
- Require a double materiality approach: considering both financially material sustainability risks (outside-in) and a company’s own sustainability impacts (inside-out) in financial decision-making.
- Clarify the new prudent person principle: make it clearer that sustainability risks should be considered as part of insurers’ fiduciary duties.
- Embed responsible stewardship practices: require stewardship policies, practices and reporting for investment and underwriting activities.
- Incorporate ‘impact underwriting’: requiring insurers to develop sustainability-related underwriting policies.
- Board oversight – ‘tone from the top’: requiring board-level oversight of the development and integration of the sustainability strategy.
- Strengthen reporting requirements: making the Task Force on Climate-Related Financial Disclosures (TCFD) mandatory.
- Align prudential requirements with the high risks posed by unsustainable activities: particularly in relation to fossil fuel assets and policies that cover policyholders engaged in fossil fuel-related businesses.
PG: Do you expect any special focus on insurance at the forthcoming COP26?
SH: The insurance sector will definitely be a big topic. The Glasgow Financial Alliance for Net Zero – another net-zero alliance – includes many insurers, including the NZIA. As with other such initiatives, they’re also quite focused on commitments – although they do also have an element that is focused on technical collaboration on substantive and cross-cutting issues that will hopefully lead to some more practical and action-oriented next steps.
As we have seen with the large number of extreme weather events this year, including increasingly intense and devastating floods and wildfires, action cannot come too soon. As such, I really hope that this year’s COP serves as a wake-up call for all those insurers that still need one and encourage those insurers that are already acting to further increase their ambition.
PG: Your thoughts about women in leadership roles?
SH: There is definitely insufficient gender diversity at insurers at the moment, with only 25 per cent female representation at board level among the insurers we analysed. Slightly promising is that gender diversity is the second most common human rights-related engagement topic insurers raise with investee companies – although that is still only done by 11 out of the 70 insurers.
I always think it’s quite telling that the finance sector in general is quite dominated by men, whereas, in the NGO-space, most organisations are either split quite equally or employ more women. This appears to indicate that women generally tend to care more about sustainability and making the world a better place – although of course there may be many other reasons for this difference in gender representation too.
Beyond my own subjective observations, there’s also some proper studies that have been done that appear to show that more women in leadership positions leads to positive outcomes: research has shown that strong growth among European companies is most likely to occur where there is a higher proportion of women in senior management teams. Companies with more women on their boards have also been found to outperform their rivals with a 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity.
So in short, I do think having more women involved, both in the insurance sector and in the context of COP26, would be beneficial – although of course it would not be the only factor that could make a difference.
PG: Grateful for these first-hand insights, Sonia. Hoping that all your endeavours lead to a world in which financial institutions use their influence to actively contribute to society’s goals.
“Close your eyes and a season will pass before you
had you the century’s gaze
of a coast live oak
It will not survive this, either
It sheds bark
breaks branch
Lovers’ carved symbols seeping their wound of sap”.
– From Kristen George Bagdanov’s, Fossils in the Making***
Are there enough women in the COP26 leadership?
‘The numbers speak for themselves, tells me Nishtha. At the COP25 21% of the 196 heads of delegation were women. The Leadership team for COP26 consists of only15% women. The complete leadership team of host UK is male.’ Facing severe criticism – they have slightly amended the picture, by appointing two female directors (for Communications and Operations) and one female Champion (for Adaptation and Resilience). We need to see 50:50 vision at the negotiating table if this conference wants to be successful. The head of comms and operations won’t be at the negotiating table, as I understand.
The mammoth bureaucracies at the multilateral agencies operate in silos. ‘Since 2008, one of the main priorities of UNESCO, for instance, has been Gender Equality’, points out Nishtha. ‘They have been making sure gender equality is being promoted through their various activities as well as programmes. However, women across the world still have less access to proper education, employment, and basic resources. Gender equality and empowering women is also the main concern of Sustainable Development Goal (SDG) 5, which is one of the 17 goals established by the UN in 2015’.
‘Equal participation and leadership of women in political and public life is crucial to achieve the SDGs by 2030. However, achieving gender parity is not something we can expect in next nine years, she warns, ‘if women are underrepresented in important platforms like COP26’.
What needs to be done?
It may already be too late as the conference commences on October 31, 2021. However, Nishtha is not losing hope. And here is her set of prescriptions:
- ‘A gender-responsive outcome at the COP26 would assist in setting the standard for implementation of gender-responsive climate policy.
- Policies of the UN promote gender balance but in addition, the UN can invest in gender action plans. It can help countries in developing comprehensive projects that are built on unique knowledge and perspective of women.
- Set goal for COP27: 50% women in leadership team.
- Identifying gender sensitive strategies for tackling environmental and humanitarian crisis caused by climate change. Studies show women are more vulnerable post natural disasters because they are usually at higher risk of being placed at overcrowded and unsafe shelters due to lack of assets, like property or savings.
- Gender sensitive strategies will promote enlisting women in natural disaster management decision-making processes and make use of their skills in mitigation and adaptation efforts’.
‘Women and children are vulnerable to climate change. Gender Equality is a human rights principle and to ensure climate related issues are taken up effectively, it is important to have women in the leadership. Gender divisions in climate are a must to tackle climate change. It is essential to make sure women have equal resource and space as men to participate in climate change decision making at all levels.’
Quoting Women Watch, she says: ‘The active participation of women in the development of funding criteria and allocation of resources for climate change initiatives is critical, particularly at local levels. Gender analysis of all budget lines and financial instruments for climate change is needed to ensure gender-sensitive investments in programmes for adaptation, mitigation, technology transfer and capacity building.’
Are we listening?
***“These lines, as well as the endings of many of the poems in Fossils in the Making leave us feeling unsettled. The collection causes us to feel as though we were on the edge of catastrophe, biding time as we go about our daily lives – it returns not only to our mortality as individuals, but to our collective mortality as residents of a planet in distress’’. (Source: http://www.thecarolinaquarterly.com).
My LinkedIn comment on this ET story:
As air quality deteriorates so will overall health of the people, demand for health insurance will surely grow. However, is upping premiums the only response insurers can provide? Would not insurers wish to introspect their role in raising the pollution levels by say insuring and investing in the #fossilfuels and other unsustainable businesses?
Indeed, insurers have a significant role and do some amazing things for the society at large. But this is truly ‘oxymoronic’ – that you aid and abet health conditions and then also insure them. And it is not just physical health. A latest study published in the British Journal of Psychiatry reveals exposure to air pollution leads to more severe mental illness (https://lnkd.in/ew7EuCYk), We have most number of polluted cities and rank amongst the top three CO2 emitting countries, in the world. Btw, women and children are the most vulnerable of the lot. We are in the midst of a serious global #climatecrisis. Should this pass us by as just another news story?!
The Diversity Blog 