Insurers must lead a step change for our oceans
On an increasingly fragile planet, the oceans play a central role in regulating the climate. As the second largest group of institutional investors in the world, how can insurance companies help minimize the environmental damage to our seas and the significant ripple effects?
Oceans under pressure
Climate change continues to increase the temperature of the earth and the oceans are suffering deeply. As their waters warm and expand, sea levels could rise by more than a meter in the next century.
Large swaths of the Arctic have already disappeared and climate change could eventually redraw the map of the world. A more immediate effect of warming oceans is the higher number of intense storms that wreak havoc on lives and increase insurance claims.
But in addition to global warming, another environmental catastrophe is occurring in our oceans in the form of plastic pollution. There are now between 50 and 75 tons of plastic in the sea, weighing 363 billion pounds.
In addition to suffocating the life of the marine ecosystem, plastic pollution weakens the ability of the oceans to absorb harmful CO2 and limits the significant contribution of greenhouse gases to global warming.
Something has to give and it’s up to influential industries like insurance to drive the change.
Insurers on mission
With nearly $40.3bn (£30.8bn) in assets, insurance companies have a huge responsibility to divert more of their investments to ethical and sustainable assets and to make changes to the companies in which they invest.
But insurers can also exercise their influence in deciding who they insure. More than 140 companies have signed up to the Sustainable Insurance Principles initiative and all have pledged to help address key environmental, social and governance risks.
As investors and policy providers, insurers can help solve the environmental problems facing our oceans in the following ways.
1. Reduce transition risk
As the world transitions to a low-carbon and more sustainable economy, investing in companies that produce or rely heavily on single-use plastics creates a very real transition risk for insurers.
As consumers become more aware of the dangers and some countries ban these ocean pollutants entirely, it has never been more urgent to clean up your wallet and stop investing in single-use plastic producers. Plastic pollution should also be factored into insurers’ own ESG frameworks, alongside reducing holdings in carbon-intensive industries.
Underwriting portfolios also contain transition risks. By choosing not to insure industries heavily dependent on fossil fuels or those involved in the production of single-use plastics today, companies can mitigate the effects of tighter environmental controls on revenues tomorrow.
2. Address the physical risks of pollution
Tackling plastic pollution and exposure to fossil fuels across your organization will give you a leadership role in fighting climate change and reducing its catastrophic impacts.
In 2021, natural disasters caused insured losses estimated at $105 billion worldwide. With rising oceans, coastal flooding will only increase, while plastic pollution threatens the health of humans, pets and marine life, damages marine vessels and biodiversity, and has a detrimental economic impact on the fishing industry and many other commercial incomes.