Lloyd’s has outlined plans to speed up the shift to a more sustainable insurance and reinsurance marketplace in its first “Environmental, Social and Governance (ESG) Report 2020”.
The plans, published in December 2020, set out pledges and targets including quotas on female representation in leadership positions and tough new measures to reduce the market’s involvement in certain fossil fuels.
Lloyd’s said this will build on its existing ESG work with a comprehensive market-wide strategy that aligns with the United Nations’ Sustainable Development Goals and supports the principles set out in the Paris Agreement.
The report highlights ongoing work to drive culture change across the Lloyd’s Market with commitments to meaningful and measurable actions to build a more inclusive working environment. These include establishing the Lloyd’s Culture Advisory Group and setting gender targets during 2020, and new ethnicity targets to be announced in 2021.
To support the global transition to net zero carbon, Lloyd’s outlined a range of existing and new initiatives. For example, Lloyd’s Corporation will allocate 5 percent of Lloyd’s Central Fund for impact investments by 2022 and will draw up a roadmap for transitioning to net zero for its own operations by 2025.
For the first time, Lloyd’s has confirmed publicly accountable targets for responsible underwriting and investment for the wider Lloyd’s market. The targets were developed after seeking feedback from the market and include aims to obtain 2 percent of premium income from innovative and sustainable insurance products by 2022.
In the run-up to the UN Climate Change Conference (COP26), in Glasgow in November 2021, Lloyd’s will consider further actions that the insurance sector can take to support the global effort to address climate risk, and respond to the UK government’s 10-point plan for a green industrial revolution.
“The targets we are setting will be challenging, but will also bring new opportunities.”
Bruce Carnegie-Brown, Lloyd’s
Diversity targets
Further key commitments and targets in the plan include a phase one target of 35 percent female representation in leadership positions across the market, new targets for black and minority ethnic representation in leadership positions, and the development of a new risk centre, to be launched in 2021. This centre will undertake research into new insurance products to protect society from systemic risks, including climate risk.
Timescales have been laid out for the market to phase out insurance cover and investment to help accelerate society’s transition from fossil fuel to renewable energy.
This involves ending new investments in thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities by Lloyd’s market participants and by the Corporation, from January 1, 2022, and phasing out existing investments in companies with business models that derive 30 percent or more of their revenues from these activities by the end of 2025.
In addition, Lloyd’s market managing agents have been asked to stop providing new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands, or new Arctic energy exploration activities from January 1, 2022.
To help the market support its customers as they transition their businesses away from fossil fuels, Lloyd’s has set a target date for phasing out the renewal of existing insurance cover for these types of businesses of January 1, 2030.
This includes companies with business models which obtain 30 percent or more of their revenues from any of these activities.
Bruce Carnegie-Brown, chairman of Lloyd’s ESG committee and chairman of Lloyd’s, said: “This is the first time we have set an ESG strategy for the Lloyd’s market and it represents an important milestone on the journey towards building a more sustainable future.
“We have the opportunity to play our part in building a braver, more resilient world. We recognise that the targets we are setting will be challenging, but will also bring new opportunities. We will work closely with our market and customers to help them plan for these changes as we implement a long-term managed programme towards sustainable, responsible underwriting.”
Andrew Brooks, chairman of the Lloyd’s Market Association said: “We are fully supportive of Lloyd’s ambitions to set out a path in which the market can work together to support our customers globally on their transition to a more sustainable future. As a market we must act decisively now and play a more effective and proactive role in supporting positive societal change.”
“The target date for Lloyd’s to phase out existing policies should be January 2021 for companies still developing new coal and tar sand projects.”
Lindsay Keenan, Insure Our Future
Mixed reactions
Lloyd’s has been broadly praised for its ESG ambitions but some campaigners said they do not go far enough.
The Chartered Insurance Institute (CII) welcomed the move, saying it highlights the market’s leadership.
Keith Richards, chief membership officer of the CII, said: “The challenges of achieving the ambitions of the Paris Agreement and the more recent Net Zero by 2050 target by the UK government, are fundamental to the future of our whole society, and insurance will play a huge role in the success of these goals, all around the world.”
He said the Lloyd’s ESG report was a “welcome response to a changing landscape”.
“At the heart of this is the concept of building a brighter future, a philosophy that the CII has long shared, and we are delighted to support the launch of these detailed plans for a more environmentally conscious marketplace.
“We commend Lloyd’s for its work on this and the creation of an ESG Advisory Group to steer their ambitions as they progress.”
In contrast, the pressure group Insure Our Future, while broadly welcoming the plans, said they did not go far enough.
Lindsay Keenan, European coordinator for the group, deemed Lloyd’s new policy to no longer provide new insurance cover for coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration “a step in the right direction”.
But she added: “The policy should take effect now, not 2022. Additionally, the target date for Lloyd’s to phase out existing policies should be January 2021 for companies still developing new coal and tar sand projects. Lloyd’s 2030 deadline is not justified by climate science and the urgent need for action. We will continue to hold Lloyd’s accountable until it has met these recommendations.”
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