Businesses that prioritize eco-conscious practices, such as resource management, waste reduction, supply chain optimization, and renewable energy, can generate green profits. These profits are generated from environmentally conscious products, services, or operations, resulting in financial success. Green profits are associated with the sustainable and eco-friendly business sector that manages its impacts. Examples of how companies can gain green profits include offering affordable insurance plans that promote eco-friendly behaviours, insuring energy-efficient appliances as well as insurance for flood and drought-affected damages in semi-arid regions.
We can fully agree that insurance is crucial for protecting individuals from various threats whilst protecting their well-being. But…why are we placing green profits and Insurers in the same sentence? It is interesting to cite that insurers can contribute to promoting sustainability while building on their green income. Insurers matter in our collective progress towards embedding sustainability across different industries and improving the value added to their markets.
Green profits through integrating ESG practices in insurer investment can act as an enabler in powering the global efforts towards sustainability and universal security. Insurance really does matter under the scope of the Sustainable Development Goals.
The 8th SDG mentions insurers, but there are no concrete KPIs linked to them. What’s more, insurance metrics aren’t being effectively tracked. Take Kenya, for example; financial inclusion has come a long way- rising from 27% in 2006 to 84% in 2021, but insurance, primarily through NHIF plays a role in progress though insurance is not a notable contributor. This trend is seen across Africa, where people view insurance as a luxury only pursued after fulfilling basic needs like food and shelter. Understandably, others may not be aware of the benefits of insurance in protecting their livelihoods. Despite sustainable investment trends, the insurance industry on the continent is still in its infancy. While countries like South Africa have attempted to expand insurance access, there has been insignificant significant change. According to the publication ‘African Renewal’, these efforts have only reached 8% of Sub-Saharan residents and do not cover outpatient medication. As a result, individuals are struggling to manage their health, and in some cases, are dying from preventable illnesses.
There is a clear problem that insurers need to address: how to adopt a sustainable mindset. Fortunately, there is already a framework in place that provide a shared language and definition of the issues that need to be addressed to create change. The UN’s Sustainable Development Goals (SDGs) can help insurers align themselves with ESG (environmental, social, and governance) practices and find ways to contribute to sustainable development.
Transitioning to sustainable practices in investment strategies can be difficult. Seeking guidance from professionals who specialize in creating sustainable strategies is essential. They can provide training and ensure proper progress reporting. Insurers must demonstrate a commitment to eco-friendly practices to differentiate themselves from competitors and monitor their ESG projects, demonstrating prioritization and a positive brand image.
UNEARTHING OPPORTUNITY: LAYING THE BRICKS FOR SUSTAINABLE INVESTMENT STRATEGIES
Incorporating sustainability into insurers’ business models allows them to expand risk identification to include climate risks, enabling them to create insurance options for underserved markets like farmers who require protection from unpredictable weather patterns caused by climate change. Integrating ESG into business strategies in African industries is a relatively new concept. Even so, massive steps are being made towards streamlining objectives, e.g.: The Nairobi Declaration on Sustainable Insurance in 2021 aims to bring together insurers in Kenya for progressive solutions, and to promote sustainable development.
By implementing ESG-related KPIs and initiatives, insurers can gain valuable insights into their priorities, which should prioritize holistic customer protection and social and environmental responsibilities. These efforts can result in green income for the business and provides an indicator that the insurer is taking their well-being seriously through responsible practices. To effectively integrate ESG strategies, it is critical to engage with stakeholders and plant initiatives into organizational deliverables for application and tracking. This helps insurers comprehend what matters to their stakeholders and develop material topics that will guide green investment.
It is easier said than done. Insurance organizations often struggle to report their sustainability progress and build their strategies due to time and occupational experience. To address this, professionals with a background in sustainability are employed to guide organizations in forming and reporting sustainability objectives, making ESG integration into investment initiatives a seamless process. This approach helps organizations understand the market and reporting standards associated with sustainability, ultimately enhancing their overall sustainability strategy. They make embracing ESG into investment initiatives a seamless process.
INSURING THE BASKET FOR OUR EGGS JUST IN TIME FOR SUSTAINABILITY
By covering unexpected events, insurance is an effective way to minimize emergency costs ‘just in time’ for an unforeseen event. When insurers incorporate ESG factors into their investment strategies, they can achieve both sustainability and profit. Sustainable investment practices not only benefit society but also provide an opportunity to encourage responsible behaviour.