The sustainability agenda remains a complex area for insurers, with challenges around strategy, transition planning, and reporting continuing to increase. The insurance industry plays a key role in the climate transition post-COP28, but faces barriers in capacity and appetite to meet the expected increase in demand. Key sustainability issues for insurers in 2024 include:
- Climate transition plans 2.0: Early adopters are preparing second climate transition plans with greater detail on levers, emissions pathways, and further targets, while addressing concerns around forward-looking statements.
- Refreshing targets and commitments: Companies are revisiting interim targets for 2025, with greater clarity and specificity expected in the next round, focusing on tangible outcomes and portfolio alignment.
- Supporting individuals’ emissions reductions: Insurers can help consumers reduce emissions in home, motor, and travel lines, benefiting from increased customer satisfaction and loyalty, and potentially new ecosystems for retrofits and sustainable repairs.
- Sustainability disclosure is becoming mandatory: Audited climate and sustainability disclosures are becoming mandatory, with the EU’s CSRD leading the trend. Insurers are accelerating CSRD readiness, with the double materiality assessment being a critical first step.
- Scaling climate adaptation and resilience: Climate adaptation and resilience present a $71 billion annual revenue opportunity, with insurers expected to integrate these into their sustainability strategies as climate impacts mount.
- The COP28 pledge to make health systems more climate-resilient: Insurers are expected to factor climate change into mortality and morbidity assumptions, with implications for underwriting and social issues within ESG.
- Integrating sustainability operating models and the role of Chief Sustainability Officer: The role of Chief Sustainability Officers (CSOs) is evolving to influence operations across strategic and operational disciplines, requiring strong support from senior leadership and multi-disciplinary teams.
- Beyond climate — the increased focus on nature: Insurers are assessing nature-related impacts and risks, with leading insurers expected to make their first TNFD-aligned disclosures and pilot nature-related scenario analysis.
- The next generation of sustainable funds: Insurers are directing more sustainable investments into thematic funds aligned with net-zero and nature-positive transitions, including carbon improver strategies, transition-enabling investments, and venture capital funds.
Overall, insurers must prioritize sustainability, integrate it into their core operations, and actively participate in the transition to address climate and nature-related risks and opportunities.
