Amid stringent environmental, social, and governance (ESG) requirements, greenwashing concerns are becoming more prevalent for insurers as they try to grapple with risks relating to the issue.
Conducted by Ortec Finance, a recent survey, targeting investment management professionals within the life insurance, London markets re/insurers, and investment managers serving the insurance sector, highlighted growing apprehensions regarding greenwashing amid tightening ESG criteria.
The findings indicate that almost half (45%) of respondents were very concerned about greenwashing in investment practices, with an additional 53% expressing moderate concern. Despite these concerns, there is an intent among these institutions to augment investments in green bonds and specialised climate-focused funds within the coming two years.
Specifically, 62% of participants plan to increase their allocations of green bonds, while a significant 75% aim to do so for climate-focused funds.
However, there is underlying anxiety that the spectrum of investable options for insurers might contract due to the imposition of stricter ESG mandates. Approximately 80% of those surveyed expect a reduction in the range of available investment opportunities due to ESG constraints, with 9% foreseeing a considerable contraction.
The study also shed light on the industry’s self-assessment of current ESG strategies and programmes. Only 18% of respondents view the industry’s ESG initiatives as very good, a figure that marginally increases to 21% when evaluating practices within their own organisations.
Fears over meeting ESG targets are also quite prevalent in the sector, as revealed by a recent Gallagher study.
Hamish Bailey, managing director UK and head of insurance & investment at Ortec Finance, commented on the survey results, noting that there is a robust demand among insurers and insurance asset managers for specialist climate-focused funds and green bonds.
“However, this is countered by mounting concerns over greenwashing and the anticipation that investment options will diminish as ESG criteria tighten,” Bailey said. “Insurers are increasingly in need of guidance to identify investments that are both beneficial for their portfolios and compliant with ESG standards, necessitating a more rigorous scrutiny of greenwashing practices.”
What are your thoughts on this story? Please feel free to share your comments below.
