Twelve Capital: (Re)insurers can improve access to capital by embracing ESG
Effectively plugging into the growing environmental, social and governance (ESG) investor community can provide (re)insurers with enhanced access to capital at a lower cost, according to Twelve Capital’s analytics head Marcus Rivaldi.
Speaking to The Insurer TV during the latest edition of Prospective, our monthly flagship analysis programme, Rivaldi highlighted how the already rapid growth of the ESG investor community will likely accelerate in the years to come.
PwC data shows the total assets under management (AuM) labelled as ESG as of the end of 2019 stood at €1.6trn within the European mutual fund sector, representing 15 percent of the total assets in the sector.
“PwC has also forecast out until 2025 – at the low end of its forecast ESG-labelled funds will represent around 40 percent of total AuM in the European mutual fund sector. At the top end of the forecast, ESG will represent nearly 60 percent,” he told The Insurer TV.
Reaching the bottom end of this forecast would represent a compound annual growth rate of more than 20 percent, Rivaldi said, which would represent an acceleration of the growth seen to date.
“If you are able to effectively plug into the ESG community, that will improve your financial flexibility and ability to access capital at an affordable cost”
Rivaldi said the growth of ESG can present opportunities for an industry such as reinsurance, which relies on being able to access capital at an affordable cost in order to grow.
“If you are able to effectively plug into the ESG community, that will improve your financial flexibility and ability to access capital at an affordable cost,” he said. “This allows you to grow and take advantage of opportunities as they arise.”
Rivaldi said lowering input costs from a capital perspective and showing stronger growth can in turn bring valuation benefits to (re)insurers, he said.
Rivaldi was speaking during the latest edition of The Insurer TV’s Prospective, which examines how (re)insurers are under pressure from regulators, governments, society and even their peers and customers to embrace ESG issues on both sides of their balance sheet.
Industry engagement with ESG has risen exponentially in recent years amid tightening regulatory scrutiny.
A recent analysis by The Insurer found regulatory watchdogs are increasingly expanding their focus through the lens of insurers’ investment standards to scrutinise what it means for their main business of underwriting. This is creating new demands and tensions for carriers as they have to measure what the ESG implications are for their risk profiles, clients and liabilities.
Earlier today (1 March), UK insurer Aviva set out a bold vision around its ESG agenda which included clear targets on both its investing and underwriting.
To learn more about ESG and how it is shaping the future global insurance industry, click the link below to watch the latest episode of Prospective. It includes a series of interviews with leading industry ESG experts including Marcus Rivaldi.