The insurance industry is not closing its eyes to the trend towards more sustainable investment. As the 2023 ESG Report by the rating agency Franke & Bornberg shows, many industry participants are stepping up their efforts to reduce emissions and conserve resources, from product design and investments to their own operations. "In particular, the comparisons with previous years indicate a clearly positive trend," the authors of the report write. ESG stands for the English abbreviation for Environment, Social Affairs, Corporate Governance.
Philipp Krohn
Editor in the economy, responsible for "People and Economy".
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In the meantime, a transformation process in the industry is clearly visible, at least among the 28 companies that have been checked by questionnaire. They account for about half of the premium income in the German insurance industry. The potential to innovate through a focus on sustainability is evident in product design. For example, various insurers integrate an element into residential building policies that compensates for CO2 emissions caused by a fire.
Zurich has included additional costs due to more ecological building materials in the event of repairs in its company building policy. In household contents insurance, Arag pays 130 percent of the insured value if policyholders opt for repairs instead of buying a new one. And Universa pays a technology subsidy if a car is replaced after damage and the customer switches to electric mobility or hydrogen propulsion.
Billions in investment have a strong impact
The authors see a great deal of leverage in capital investment. After all, German insurers managed a good 2021.1 trillion euros in 8. A majority of companies work with negative criteria. Many ruled out investing in states and companies that violate human rights. 57 percent of insurers did not buy government bonds from countries that have been proven to have such bonds by Amnesty International. Half of the respondents were guided by the annual report of the organization "Freedom House". For 46 per cent, child labour is an exclusion criterion, while 43 per cent are guided by Transparency International's corruption index and have defined exclusions.
Investments in companies that produce outlawed weapons were excluded by 82 percent of insurers in the report. Companies are withdrawing from coal activities with varying degrees of intensity. Currently, tolerance thresholds of 10 to 30 percent of total sales from fossil fuel activities are widespread. If a company is above its value, it is no longer an option for an investment.
For a different strategy of sustainable investment, some companies stand in the way of their own lack of size. After all, 60 percent of companies make use of their opportunity to exert influence on companies in which they have invested through voting rights. But only 40 percent seek direct dialogue with management.
More can be achieved with regard to one's own insurance operations. For example, there has been a visible improvement in key figures over the past three years since the report was published: 78 percent of insurers use renewable energy for their employees. Three-quarters use only green electricity. Waste and paper volumes are continuously decreasing. The fact that progress is being made in these easier-to-convert areas in one's own company may have something to do with the remuneration of managers. 15 out of 28 insurers also link them, at least in part, to the achievement of sustainability goals. Industry reports like this one provide at least some transparency.