Cette tendance, qui s’inscrit logiquement dans le thème global du salon—Villes et Territoires durables, horizon 2030—, reflète bien un sujet majeur de préoccupation, à retenir pour les villes françaises en 2019, et au-delà. Le projet de Territoire Intelligent (Smart City) d’Angers Loire Métropole (ALM), attribué la semaine d’avant à un consortium mené par ENGIE, en est d’ailleurs emblématique : les objectifs affichés par ALM sont notamment d’ « accélérer la transition écologique du territoire » et permettre « d’importantes économies d’énergie » au travers de la mise en œuvre d’une plateforme d’hypervision de la ville. En deux mots, un territoire plus durable, grâce à une plateforme connectée aux infrastructures urbaines « intelligentes ».
Le sujet de la transition énergétique et écologique s’invite bien évidemment au cœur des stratégies des villes du fait de l’urgence climatique — comme l’ont encore montré les tragiques évènements climatiques extrêmes, qui se sont reproduits dans quart Sud-Est de la France. Ce sujet, bien qu’essentiel, n’est pas seul qui, nous semble-t-il, devrait occuper les esprits.
Dans une perspective d’impact ESG plus large des villes et territoires, nous avons ainsi développé notre propre solution de notation d’Impact des villes, qui comprend 11 domaines d’impact spécifiques. Dans ces domaines se retrouvent ceux aujourd’hui au centre des préoccupations, et qui concernent l’Énergie et Environnement, ainsi que la dimension de « Connectivité » de la ville (Communications, Infrastructures « Intelligentes », etc.), mais aussi d’autres dimensions essentielles à nos yeux pour mesurer l’impact ESG d’un territoire : Éducation, Gouvernance, Sécurité, ou encore Santé, à titre d’exemple.
Les zones urbaines, rappelons-le, regrouperont d’ici 2050 près de 70% de la population mondiale, d’après l’OCDE, alors que seulement 34% y vivaient en 1960. L’avenir de l’humanité est donc forcément entre les mains des villes, qui sont aujourd’hui les principales sources de pollution et les zones les plus à risque, mais qui constituent aussi et surtout, avec leurs éco-citoyens en devenir, notre plus grand levier pour accélérer la transition durable des sociétés humaines—et sans doute notre seul espoir.
The 2019 French Mayors and Local Authorities Fair (Salon des Maires et des Collectivités Locales 2019) was held from the 19 to the 21 November in Paris, Porte de Versailles. We visited the exhibition, and if one trend has to be recognized, it is the following: “Energy and Ecology Transition”.
This trend, aligned with the fair global theme—Sustainable Cities and Territories, 2030 Horizon—, is indeed the sign of a main stake for the French cities, in 2019, and certainly beyond. The Smart Territory project of the Angers Loire Métropole (ALM), won by a consortium leaded by ENGIE, and attributed the week before the fair, is probably emblematic of this trend: the declared main objective of ALM is to “accelerate the ecological transition of the territory” in order to allow “important energy savings “, by leveraging a city hypervision platform. In summary, A more sustainable territory, thanks to a smart city platform connected to smart urban infrastructures.
The domain of energy and ecological transition is of course now at the very core of the cities’ strategy due the climate change emergency—tragically demonstrated once again a week ago by the deadly extreme weather event that occured in the South-East of France. This domain is absolutely essential, but, from our point, it should not be the sole concern here, when it comes to cities and territories sustainability.
From a broader ESG impact perspective, we have thus developped our own proprietary Cities and Territory Impact Rating solution, which comprehend 11 impact domains. Amonst them, the ones currently raising attention, Energy and Environement, can be found, along with the territory “Connectivity” dimension (Communication, Smart Infrastructures , etc.), but also other domains we consider essential to measure the ESG Impact of a territory : Education, Governance, Security, or Healthcare, for instance.
It must be remembered that urban areas, according to the OCDE, will concentrate, by 2050, almost 70% of the wolrdwide population, whereas only 34% of this popluation was living there in 1960. The future of mankind lies indeed in the very hands of cities, which, today, concentrate also the main pollution sources and the zones the most at risk, but they also constitutes, with their billions of to-be eco-citizens, probably our best leverage to accelerate the sustainable transition of human societey—and certainly our only hope.
How are Insurance companies integrating ESG in their core business? To start with, let’s have a look at the most impacting domains. Obsiously, two activities are mostly concerned with ESG aspects, and Climate Change issues. On the first hand, we find the Investments activities, since the insurance business is an investment-intensive activity, and any insurer thus invests the money of its customers. On the second hand, one of the mostly concerned activity is the underwriting—which concerns all things related to the insurance contracts and policies, both for the individual, or for the corporate customer.
The insurers—or, at the very least, the biggest of them—have been integrating, for years now, the ESG criteria into their investments… in a more or less serious way. But the real core of the insurance business is not the investement per se, and the asset management activity is indeed usually operated within a separate branch. Their existing approaches are unfortunately generaly very far from providing real anwsers, to real-world problems.
For whom the bell tolls
Climate Change, for instance, is not only a real-world stake, and insurers are not only one of its main actors, but, more problematically for them, one of its most (indirectly) concerned “victims”: the consequences of Climate Change have indeed a strong impact on the frequency and intensity of extreme weather events (sea level rise, flood, storms, etc.), with an increasing financial impact on the insurers finance, and their reinsurers: Year after year, the situation greatly exceed all the forecasts, both in term of weather or budget…
With the expected aggravation and unpredicatability of these natural disasters, in a maybe not-so-distant tomorrow, could hence insurers be put on default ? The modern role of an insurer should indeed not only to pay—when it’s too late (i.e. after the occurence of a risk)—but, more important, its role should be to prevent, or reduce, as much as it is possible, the occurence of the risks… a principle which is maybe currently too much out of sight within the insurance business—when it comes to the ESG stakes.
When I’m speaking of more or less serious approach to the integration of ESG topics in the insurance business, I’m particularly questionning the idea of, e.g., integrating ESG criteria, whereas at the same time continuing to invest in enviromentally or socially detrimental activities, such as fossils fuels, dangerous pesticides, etc.
As a modern investor, do I indeed really want my capital to be invested in activities currently compromissing the future of mankind, if not of the whole planet ? My own future, and the future of my children ?
—It tolls for thee
We are all in the same boat—a ship of fools… Thus, today, it must be first stated, to the insurers’ investment companies truly wanting to progress in the right direction, that exclusion policies are no longer enough—especially when the results are not publicly disclosed, and are thus, silently, regressing, instead of progressing. And, in 2050, it will be too late to take action, considering the current environmental impact of human activities, and the CO2 emissions released into the atmosphere.
No man is an island entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as any manner of thy friends or of thine own were; any man’s death diminishes me, because I am involved in mankind. And therefore never send to know for whom the bell tolls; it tolls for thee.
— John Donne, Meditation XVII, Devotions upon Emergent Occasions, 1624 (translated from Early Modern English)
But where to start ? For instance, a Carbon Footprint of all investments instruments could be disclosed—to date, very few investors disclose such information—along with a true Energy Transition strategy. Here again, we could count the insurance companies on the fingers of one hand… Even worst, in the underwritting domain, everything still needs to be done, in order to integrate the ESG criteria into the insurance underwritting process.
The UNEP FI PSI initiative, Principles for Sustainable Insurance, is laudable, but so far it brings no, or little, solution on the table. It’s nevertheless a must-read, and inspiring source for the insurance top-management, and one which sets the moonshot for the whole industry.
Sustainable insurance is a strategic approach where all activities in the insurance value chain, including interactions with stakeholders, are done in a responsible and forward-looking way by identifying, assessing, managing and monitoring risks and opportunities associated with environmental, social and governance issues. Sustainable insurance aims to reduce risk, develop innovative solutions, improve business performance, and contribute to environmental, social and economic sustainability.
A maybe sharpest approach is the one proposed by the EU through its taxonomy for sustainable activities, published in June 2019. The document underlines the role of Insurance as a key sector in the economy transition and climate mitigation. It thus demand to the whole sector to assume its full responsibility in the integration of ESG criteria into its core business. The work produced by the EU is of a great quality, and rooted in strong convictions. Let’s hope it will help foster the transition toward a more sustainable world.
But will these requests of the EU and UN be followed by concrete actions from the industry ? The answer lies in the hands of the insurance sector. The context is nevertheless clear enough—those who want to survive and still be there in 2050 need to take action. Now. But the insurers need to be commited to integrate ESG risks into insurance underwritting not only because their customers, or shareholders require it, but because their financial future—and our own future—depends on it. It’s a question of survival, which needs to be fully understood, and integrated on a daily basis, by the top management, and the whole management. Then things could be set, eventually, in movement, and positive impact delivered, possibly very quickly.
Integrating the ESG riks in the insurance underwritting is, indeed possible. It requires, mostly, a commitment to achieve this goal, and the right approach. That’s why, at Impactin, we have developped our own insurtech solution allowing to score the ESG risks of an insurance contract, to measure the ESG impact of a corporate insuree’s activity, and even to accompany the corporate insurance customer into its positive impact journey, and ecological transition—for the greater good.
Yes, all of this is possible, there are no excuses any longer in the Insurance sector—and our mission here is to help you achieve your own sustainable goals! Let’s get started.
After having spent in Singapore our first week of our activity, for our very first contract, we can tell that Singapore is certainly not a random destination when it comes to Sustainable Finance.
The City-State is indeed the 5th market in this domain in Asia (excl. Japan), with a share of 11%, after Malaysia, Hong-Kong, South-Korea, and China. The Fintech landscape is also very active, with a strong commitment of the Regulator to develop this domain—and, in effect, Singapore Fintech Festival SFF x SWITCH, is starting today for 5 days of financial innovation (11-15 Nov.).
Furthermore, the whole Asia Pacific region has become the world’s growth pole, with 40% of the global GDP in 2018—but is also contributing to 48% of the world’s total CO2 emissions, and is exceptionally exposed to climate change impacts: sea level rise, extreme weather, high temperatures, etc.
In this context, it is thus really worth noticing that Asia’s share (excl. Japan) only accounted for 0.2% of the global sustainably managed assets in 2016 (ie. USD 52bn vs. USD 23tn), i.e. for 0.8% of the Asian assets (excl. Japan), with a predominance of Sharia funds, representing a third.
Asia is thus a region with both serious ESG challenges, and with an incredible potential for transformation—and we, at IMPACTIN, hope to be contributing on it in the coming months!