Multinational insurance company AXA’s Future Risk Report 2023 ranked climate change as the public’s top risk across all geographies surveyed based on the potential impact on society for the near future. Many Filipinos have witnessed and are experiencing extreme heat, irregular weather patterns, and flash floods due to the effects of global warming.
These physical manifestations of climate change can lead to damaged infrastructure, ruined properties, and even disrupted supply chains leading to huge losses for companies and economies alike. However, the effects of climate change can also present themselves in the form of policy change, technological advancement, and market sentiment which may raise costs and reduce incomes for Filipinos.
Despite these risks, some top officials have reported their companies’ lack of climate actions with 36% of CEOs admitting that they had no plans to invest in nature-based climate solutions, while 31% said that they had not included climate risks in their financial planning, according to PricewaterhouseCooper’s latest Annual Global CEO Survey.
The increased awareness of climate change’s effects and the lack of solutions tackling global warming highlight the urgent need for insurers to proactively address environmental risks and incorporate sustainable practices into their operations.
Sustainable insurance is defined by the UN Environment Program’s Financial Initiative (UNEP FI) as 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.”
This type of insurance seeks to reduce risk, develop innovative solutions, improve business performance, and contribute to environmental, social, and economic sustainability. The UNEP FI has a set of principles for sustainable insurance which serve as a global framework for the insurance industry.
These principles include: embedding environmental and social issues in decision-making; raising awareness of environmental, governmental, and societal issues; promoting widespread action across society regarding those issues; and demonstrating accountability and transparency about the progress in implementing these principles.
Following these principles, the Security and Exchange Commissions along with Bangko Sentral ng Pilipinas, the Insurance Commission, and the Philippine Deposit Insurance Corp. formulated the Philippine Sustainable Finance Taxonomy Guidelines which gives businesses easier access to sustainable financial services and allows stakeholders to make informed decisions related to sustainable insurance, investments, and financing.
Local laws encouraging sustainable insurance in agriculture, crops, and other products are proposed in the 19th Congress. House Bill No. 315, or the Free Index Based Agricultural Insurance Act of 2020, encourages aims to support small farmers against the effects of climate change by establishing a regulatory framework and program for free weather index-based agricultural insurance.
Meanwhile, House Bill No. 165 focuses on establishing a national framework for the mandatory environmental insurance coverage of environmentally critical projects. The policy aims to ensure sufficient financial coverage for communities affected by the effects of climate change leading to damages.
Alongside these efforts in embracing sustainable insurance in the country, a study found that Filipinos are interested in exploring insurance options that not only provide financial protection but also align with their values of environmental responsibility and social sustainability.
A study by Allianz PNB Life shows that 44% of their respondents agreed that health insurance can be green and sustainable, while 43% said they were likely to purchase this kind of insurance.
In a landscape that is prone to risks exacerbated by climate change and other critical issues, sustainable insurance offers a promising avenue for insurers to address the specific environmental and social challenges faced by Filipinos while simultaneously stimulating innovation and promoting sustainable growth. — Jomarc Angelo M. Corpuz
