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What can financial services providers do to promote environmental sustainability?

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Environmental sustainability is not only a moral duty, but also a business opportunity for financial services providers. By aligning their strategies, products, and operations with environmental goals, they can create value for their customers, shareholders, and society. In this article, we will explore some of the ways that financial services providers can promote environmental sustainability and contribute to the global efforts to combat climate change and preserve natural resources.

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James Alexander

Meliora ESG, leading in environmental risk assessment for insurance sector. Fly Fishing addict and curry connoisseur…
David V. Cabral

Strategic Advisor | NED | De-Risking the Climate Challenge

1 Assess environmental risks and opportunities

One of the first steps that financial services providers can take to promote environmental sustainability is to assess the environmental risks and opportunities that affect their business and their clients. Environmental risks include physical risks, such as extreme weather events, and transition risks, such as regulatory changes or shifts in consumer preferences. Environmental opportunities include new markets, products, or services that can help reduce emissions, increase efficiency, or enhance resilience. By conducting environmental risk and opportunity assessments, financial services providers can identify the areas where they can mitigate their negative impacts and leverage their positive impacts.

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James Alexander

Meliora ESG, leading in environmental risk assessment for insurance sector. Fly Fishing addict and curry connoisseur. BNG Insurance, TSF, Coastal Risk and emerging chemical hazard.
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Since the 1960’s the “general liability” insurance only covered Sudden and Accidental events. This coverage restriction lead to the development of a specialty line of business in the domestic USA. How much pollution harm is gradual ? The sector is still a niche within a niche but the emergence of big data, alternative risk platforms (such as parametric and ART structures) has moved along. I believe the time has come for Insurers to create new asset’s such as BDNG within the investment portfolio AND “insured”Policy/claims side of the business. The insurer who funds Measured / Verified and Reportable BDNG improvement within operations, and the wider macro environment, will do far more than “make good”… its about “making better”.

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David V. Cabral

Strategic Advisor | NED | De-Risking the Climate Challenge
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For insurance companies to stay relevant and competitive in a rapidly changing environmental landscape, they must move beyond traditional risk management. They should actively seek to drive and shape the market by creating solutions that address not just risks but also harness environmental opportunities. This not only aligns with global sustainability goals but also presents a strategic business advantage. It’s imperative that the (re)insurance industry leads by example, demonstrating that assessing and responding to environmental risks and opportunities is both an ethical obligation and a business imperative.

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2 Integrate environmental factors into decision-making

Another way that financial services providers can promote environmental sustainability is to integrate environmental factors into their decision-making processes. This means that they should consider the environmental implications of their investments, lending, insurance, and advisory activities, and apply environmental criteria, standards, or frameworks to guide their choices. For example, they can adopt the Principles for Responsible Investment (PRI), the Equator Principles, or the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. By integrating environmental factors into decision-making, financial services providers can enhance their performance, reputation, and accountability.

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David V. Cabral

Strategic Advisor | NED | De-Risking the Climate Challenge
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Incorporating the Planetary Boundaries Framework (PBF) into environmental decision-making goes beyond existing principles and enhances environmental strategies by offering a holistic metric for assessing Earth's system impacts. Beyond CO?, it provides a comprehensive view for underwriting and risk assessment, potentially improving ESG ratings and aiding resilient client transitions. Utilising PBF can inform benchmarks, and drive systemic, long-term solutions, thus accelerating the sustainable transition.

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3 Develop green products and services

A third way that financial services providers can promote environmental sustainability is to develop green products and services that can meet the growing demand from customers, investors, and regulators for environmentally friendly solutions. Green products and services are those that support or enable environmental objectives, such as reducing emissions, increasing renewable energy, improving resource efficiency, or restoring ecosystems. For example, they can offer green bonds, green loans, green mortgages, green insurance, or green advisory. By developing green products and services, financial services providers can create new revenue streams, diversify their portfolios, and attract and retain customers.

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David V. Cabral

Strategic Advisor | NED | De-Risking the Climate Challenge
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New insurance products supporting nature-based carbon sequestration address inherent risks and encourage investment in sustainable projects. Products like Carbon Credit Guarantee and Mangrove Restoration Insurance not only provide financial safeguards but also promote environmental resilience. Developing such green services aligns with growing demands for eco-friendly solutions, creating new markets and aiding the transition to net-zero objectives, while protecting biodiversity and communities.

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4 Engage with stakeholders and partners

A fourth way that financial services providers can promote environmental sustainability is to engage with their stakeholders and partners to share best practices, collaborate on initiatives, and advocate for change. Stakeholders and partners include customers, employees, suppliers, regulators, industry associations, civil society organizations, and international organizations. By engaging with them, financial services providers can learn from their experiences, challenges, and expectations, and align their actions with their interests. They can also join or support coalitions, platforms, or networks that aim to advance environmental sustainability in the financial sector, such as the Network for Greening the Financial System (NGFS), the Sustainable Banking Network (SBN), or the Finance for Biodiversity Pledge.

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5 Reduce environmental footprint

A fifth way that financial services providers can promote environmental sustainability is to reduce their own environmental footprint and improve their operational efficiency. This means that they should measure and monitor their direct and indirect emissions, energy consumption, water use, waste generation, and other environmental indicators, and set targets and actions to reduce them. They should also adopt policies and practices that encourage or incentivize their employees, suppliers, and customers to adopt more sustainable behaviors, such as using public transport, recycling, or switching to renewable energy. By reducing their environmental footprint, financial services providers can save costs, enhance their brand image, and demonstrate their commitment.

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6 Report and disclose environmental performance

A sixth way that financial services providers can promote environmental sustainability is to report and disclose their environmental performance and impact to their stakeholders and the public. This means that they should communicate their environmental policies, strategies, goals, actions, results, and challenges in a transparent, consistent, and credible manner. They should also follow or align with recognized reporting and disclosure standards or frameworks, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), or the TCFD. By reporting and disclosing their environmental performance, financial services providers can increase their trust, credibility, and accountability, and showcase their leadership and innovation.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What can financial services providers do to promote environmental sustainability?

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1 Assess environmental risks and opportunities

2 Integrate environmental factors into decision-making

3 Develop green products and services

4 Engage with stakeholders and partners

5 Reduce environmental footprint

6 Report and disclose environmental performance

7 Here’s what else to consider

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