Abstract:ESG-related standards and requirements for the insurance industry have been formulated at home and abroad, and the ESG development of the insurance industry will usher in major changes in the future, and the ESG data and management requirements of the insurance industry will be further improved.
Since the beginning of 2023, ESG standards, regulations and rules at home and abroad have been promulgated one after another, which are not only for different regions and different exchanges, but also begin to formulate industry-specific ESG disclosure systems and standards. In December 2023, there will be successive pairs at home and abroadInsurance Institution IndustryesgdevelopmentMake clear requests.
On the morning of December 13, 2023, the Insurance Association of China held a press conference on the Guidelines for Environmental, Social and Governance Information Disclosure of Insurance Institutions (hereinafter referred to as the "Guidelines") in Beijing, officially releasing the "Guidelines" for the insurance industry.
The Guide is the first focus in ChinaInsurance industryEnvironmental, social and governance information disclosure, that is, the industry self-regulatory document on the framework and content of ESG information disclosure, can be implemented by each insurance institution with reference to its own actual situation.
The Guide consists of a main text and appendices.
l Chapter 1 "General Provisions" of the main text clarifies the purpose, basis, interpretation and disclosure requirements for the preparation of the guidelines;
l Chapter 2 "Disclosure Content" clarifies the design principles of the disclosure framework and the corresponding connotations of environmental, social and governance dimensions
l Chapter 3 "Methods and Time of Disclosure" clarifies the carrier, caliber and time of disclosure;
Chapter 4 "Disclosure Responsibility and Supervision" clarifies the responsibilities of the disclosing entity and the principles of supervision.
l In response to the needs of the high-quality development of the insurance industry, the appendix sorts out the key indicators from the environmental, social and governance dimensions through a combination of qualitative and quantitative methods, including 5 first-level indicators and 13 second-level indicators in the environmental dimension, 7 first-level indicators and 16 second-level indicators in the social dimension, and 11 first-level indicators and 20 second-level indicators in the governance dimension.
The Guidelines have the following five characteristics:
The first is to thoroughly implement the best decision-making and deployment. The Guidelines are an important measure for the insurance industry to thoroughly implement the decision-making and deployment of the insurance industry, and are of great significance for guiding the insurance industry to implement the ESG concept, strengthen the construction of the ESG management system, promote the realization of a comprehensive green and low-carbon transformation of the economy and society, and promote sustainable development.
The second is to closely connect the regulatory system. The Guidelines are closely aligned with and complement each other in the Guidelines for Green Finance in the Banking and Insurance Industries, and echo the requirements for strengthening information disclosure in ESG and green finance in the Guidelines for Green Finance in the Banking and Insurance Industries. Based on the "Statistical System for Green Insurance Business" formulated by the regulator and the "Green Insurance Classification Guidelines (2023 Edition)" recently issued by the Insurance Association of China, the inclusion of "dual carbon", "green finance" and "green operation" into the ESG information disclosure system will help promote insurance institutions to have a deep understanding of regulatory requirements, strengthen industry self-discipline, integrate ESG development concepts into corporate strategy and daily management, and improve insurance institutions' risk management capabilities and corporate governance.
The third is to reflect Chinese characteristics and industry characteristics. The Guidelines focus on international standards and actively absorb international advanced experience, and refer to a series of international mainstream ESG information disclosure standards, such as the GRI Sustainability Reporting Standards, SASB Standards, the Environmental, Social and Governance Reporting Guidelines of the Hong Kong Stock Exchange, and the GHG Protocol Greenhouse Gas Protocol, so as to achieve scientific and accurate information guidance. At the same time, the Guidelines also give full consideration to the practice of socialism with Chinese characteristics, such as the disclosure requirements for rural revitalization and inclusive investment, which highlight Chinese characteristics, conform to the people-centered value orientation and the fundamental purpose of financial services for the real economy.
Fourth, it is necessary to point out the path to improve ESG performance. Strengthening ESG information disclosure is a concrete embodiment of the implementation of ESG work by insurance institutions. The Guidelines integrate the characteristics of the industry, the development status and the requirements of stakeholders, starting from the three dimensions of environment, society and governance, through 23 first-level indicators and 49 second-level indicators, and adopting the "quantitative" + "qualitative" method, providing a clear standard that can be compared, referred to and analyzed for insurance institutions to carry out ESG information disclosure. Insurance institutions can refer to the Guidelines to improve their ESG compliance management structure, implement ESG control and improvement measures, fundamentally improve their ESG performance, form a mutually reinforcing and virtuous circle of disclosure and management, and realize the externalized value and endogenous drive of ESG.
Fifth, promote the industry to take responsibility. The insurance industry has actively implemented the national strategic deployment, from "dual carbon" to rural revitalization, from green investment to supporting the real economy, and has carried out a lot of work, which needs to have a systematic window for external elaboration and display. The Guidelines provide a unified disclosure model for insurance institutions on issues such as "dual carbon", common prosperity, and rural revitalization, so that the industry can better interpret the responsibilities of social stabilizers. By promoting management through disclosure, we will guide the industry to take more responsibility for social responsibility and green development while doing a good job in risk reduction and risk management.
SBTI Industry Profile – Net Zero Standard for Financial Institutions and Insurance Industry
On December 14, 2023, the SBTI (Science Based Targets Initiative) released a new oneIndustry Profile—Net Zero Standards for Financial Institutions and Insurance Industries, asThe first step in developing a net-zero standard for insurance for financial institutions。Reducing carbon emissions and net-zero emissions have long been key areas of ESG development and exploration.
SBTI was established in 2015 to help companies set emissions reduction targets that are aligned with climate science and the goals of the Paris Agreement. In October 2021, SBTI developed and launched the world's first net-zero standard, providing a framework and tools for businesses to set science-based net-zero targets and limit global temperature rise to 1 from pre-industrial levels5°c。SBTI has developed net-zero plans and standards for different industries. The best practices identified by the SBTI are transition plans that cover Scope and 3 emissions, develop short-term milestones, ensure effective board governance, and tie executive compensation to the milestones adopted by the company.
The financial sector has great potential to accelerate private sector decarbonization efforts. Back in 2020, SBTI developed indicators and goal-setting methodologies for investment and lending activities in the financial sector. While much work has been done to develop metrics and goal-setting methodologies for investments and activities in the financial sector, it is far from sufficient, and there is currently limited work on the insurance underwriting portfolio. This makes it more challenging for reinsurers to set science-based emissions reduction targets for their underwriting portfolios.
Insurers and reinsurers hold a significant portion of global assets and liabilities, including approximately 6$8 trillion in premiums and more than $35 trillion in global assets under management. Facilitate the transition and support the transition to a net-zero economy by leveraging the influence of its risk managers, stakeholders and institutional investors. Based on the current situation, SBTI has partnered with the United Nations Environment Programme (UNEP) to develop a Net Zero Standard Industry Brief for the Insurance Industry for Financial Institutions, which provides an initial basis for insurers and reinsurers to develop science-based emission reduction targets and align their insurance underwriting portfolios with 15°C as a first step in developing net-zero standards for insurance for financial institutions.
The industry brief provides an introduction to the types of combined emissions in the activities of financial institutions, as well as different and potential approaches to setting science-based targets to decarbonize insurance underwriting portfolios. The brief also describes how the Net Zero Insurance Standard for Financial Institutions fits into SBTI's existing financial institution goal-setting framework, the World Nature** (WWF) Call to Action for Insurance Underwriting, and several international initiatives. The core principles, potential starting points, and next steps in the net-zero approach development process are highlighted.