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David Howden calls for investment across ESG-linked catastrophe bonds

David Howden calls for investment across ESG-linked catastrophe bonds | Insurance Business UK

David Howden calls for investment across ESG-linked catastrophe bonds

Chief executive officer David Howden has urged senior leaders in the global investment, humanitarian and philanthropic communities to close the climate protection gap through catastrophe bonds.

He said this as part of his keynote speech at the World Climate Summit at COP26, claiming that if only 3% of global pension fund assets under management were redirected to insurance-based ESG investments, it would already create US$1.5 trillion of capital for social good.

“We can’t keep relying on government and charities to find more money ­­– there is far more private capital available than public – and there is huge appetite from this capital to invest in ESG, but it needs a market,” Howden said. “So, I’m here today to ask for your help in creating that market.”

According to a new report by Howden Group, the humanitarian funding gap has risen from less than US$1 billion two decades ago, to US$4 billion a decade ago, to over US$20 billion at present.

“The shortfall isn’t just a funding gap – it is lives and livelihoods,” Howden explained to the panel. “It is the difference between the 235 million people who need humanitarian support and the 160 million people that humanitarian organisations can currently afford to reach.”

To close the protection gap, Howden turned to the success of catastrophe bonds as a way to pool private capital for scaling up insurance solutions in humanitarian projects.

He cited the world’s first catastrophe bond for volcanic eruptions – a partnership between Howden Group and the Danish Red Cross – as a strong model for other kinds of disaster relief projects. The volcano bond has a multiplier effect that would compensate up to 20 times the premium.

Part of its funding came from the Howden Group foundation that now holds £100 million worth of financial relief for global projects.

“The real power of insurance lies not only in its underwriting and risk modelling capabilities, but its ability to attract and mobilise capital,” Howden said.