More Apac insurers integrating ESG criteria into their investment strategies

SEVENTY per cent of Asia-Pacific (Apac) insurers have either already integrated ESG (environmental, social and governance) criteria into their investment strategies, or are doing so, a recent survey showed.

The review, conducted by global asset manager abrdn and financial services strategy consultancy Quinlan & Associates, found that for the remaining 30 per cent of insurers surveyed, the largest barriers to ESG and net-zero integration were data quality and investment management. Other notable challenges included stakeholder management, regulatory reporting and governance.

The survey involved 56 senior executives from 43 insurance companies across eight markets in Apac. It investigated the regulatory expectations, motivations and challenges that insurers in the region face in integrating ESG factors into their investment operations.

While regulatory expectations were a key motivation for insurers to integrate ESG criteria, the survey found that company branding was the most crucial motivation, with 80 per cent of respondents rating it “important”, or “very important”.

Among external stakeholders, the expectations of end-investors were considered to be marginally more important than those of customers.

The survey also examined Apac insurers’ views of their local ESG and net-zero regulatory enforcement outlooks. It found that most Apac insurers believe that these regulations will be tightened in the next three years, especially in Australia, Malaysia and Hong Kong.

Sixty-four per cent of Singapore insurers surveyed agreed that this was going to happen, but only about half of insurers in Taiwan and South Korea saw stricter enforcement as likely.

In recent years, Apac insurance regulators have set out rapidly evolving expectations in their ESG integration requirements, with a strong emphasis on environmental initiatives and risk-management strategies.

Benjamin Quinlan, chief executive and managing partner of Quinlan & Associates, said: “Global investors faced a host of headwinds in 2022, including major regulatory changes, rising inflation, declining asset prices, and increasing geopolitical tensions.”

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Just last year, the China Banking and Insurance Regulatory Commission issued green-finance guidelines for insurers to “ultimately achieve carbon neutrality in their portfolios while simultaneously disclosing ESG risks”, the survey said.

Such regulatory developments have pushed leading Apac insurers towards aligning their ESG integration and disclosure initiatives with global standards. As of last year, 22 Apac insurers were signatories of the United Nations Principles for Sustainable Insurance, up from 20 in 2021. This signals a growing willingness among insurers to integrate ESG considerations into their investment processes.