Report of the Founding Meeting 8 July 1997 | Zurich, Switzerland
Mr. Rudolf Kellenberger, Member of the Executive Board, Swiss Re
Mr. Rudolf Kellenberger welcomed the participants of the meeting on behalf of Swiss Re. In his keynote address he gave a brief account of the history of the UNEP Insurance Initiative and its major achievements since this Initiative was launched two years ago. At the time of the meeting 70 companies from 25 countries had signed up to the UNEP Insurance Statement. Mr. Kellenberger stressed that this immense success shows an increasing awareness for environmental risk in the insurance industry. The sharp increase of claims related to extreme weather events and environmental liabilities in certain countries has shown that there is a need for insurers to address issues like local environmental pollution and global climate change. The speaker stressed that the main purpose of this initiative is to create a forum where practitioners can share experiences across lines of business and countries and develop a better understanding of environmental issues. He stated that the companies participating in this initiative want to be proactively involved when strategies for dealing with new risks are debated and when regulatory frameworks are defined. In this sense, companies are trying to move away from a reactive attitude to a more proactive one dealing with complex risks, as it is the case for environmental risk. Mr. Kellenberger concluded by emphasising the importance of founding the Association of Insurers in order to ensure that the whole initiative is managed effectively in the future. He wished all participants a successful meeting and a nice stay in Zurich.
Mr. Hussein Abaza, Chief ETEU, UNEP
Mr. Hussein Abaza welcomed the participants on behalf of Ms. E. Dowdeswell, Executive Director of UNEP. He stressed in his presentation that the level of interest among insurers in this meeting underlines the key importance they place on the sustainable development and operational implications of the green agenda. He stated that he is convinced that all participating insurance companies believe that they have a responsibility that goes beyond the purely financial aspects of environmental risk and that they are convinced that protecting human life and property, preventing catastrophic events, and making a positive contribution to the quality of life of future generations are an essential part of the insurance business. Mr. Abaza stressed the need to look ahead and explore the challenges the insurance sector faces in a number of areas such as environmental risk assessment, environmental liability, climate change and environmental performance of companies. He pointed out that the formation of this Association is a logical step to the launch of the UNEP Statement of Environmental Commitment by the Insurance Industry and it will be a very good vehicle to address some of the issues just mentioned. Through this Association the insurance industry will have a much stronger voice as it promotes environmental considerations in intergovernmental fora which is especially important in the light of the upcoming next round of climate change negotiations in Kyoto in December. The Association will also create opportunities for launching new activities and research projects in the field of environment and insurance. He stressed that there is now a very clear realization that sustainable development will not, and cannot, be achieved, by governments acting alone. There is a need to use the expertise and resources of the private sector, not as a matter of corporate philanthropy, but rather because it is the business self-interests of the private sector to understand and capitalize upon the rapidly moving national and international environmental agendas. Thus both Governments and particularly the private sector have an interest in sustaining the biosphere’s capability to regenerate life, without which economic activity would be impossible. Finally Mr. Abaza draw the attention of the participants to the launch of the two working groups. One working group will focus on asset management whereas the other will concentrate on issues related to climate change. Mr. Abaza stressed the importance of these two working groups and informed the participants that Governments and NGO’s are expecting that the insurance industry will play an important role at the next round of climate negotiations in Kyoto/Japan.
Discussion on the Rules of Association / Steering Committee / Budget and Business Plan
In this session, Dr. Andrew Dlugolecki introduced the constitution which was developed by the UNEP Steering Committee based, on the Rules of the British Insurance Association. The constitution was discussed article by article and the following changes where agreed upon by the members: 1. Article 20. Finances
insert the following sentences as paragraph (2): The Committee shall not obligate the Association by any amount exceeding the annual budget and additional membership fees and funds raised by other means during the year. 2. Annex
Minor changes in the addresses of Steering Committee members which are annexed to the constitution. After agreement had been reached on the changes to the constitution, Mr. Kellenberger declared that the Association “Insurance Industry Initiative for the Environment” officially established and invited the participants to the signing ceremony. At the ceremony 17 companies present signed the signatory book with another four companies, who were unable to attend, confirming that they were also joining up to the Association. The next session which was on the composition of the Steering Committee was chaired by Mr. Abaza. He proposed that the current Steering Committee (consisting of Gerling Globale, General Accident, NPI, Storebrand, Sumitomo and Swiss Re) should serve at least for the first year in order to provide continuity. The members of the association agreed with this proposal and the Steering Committee was elected. The present Steering Committee Members are annexed to the Constitution. Dr. Dlugolecki presented the proposed business plan and budget to the members of the Association. He pointed out that the main components of the budget would be to support the UNEP Secretariat, arrange an annual conference and carry out research. The members of the association adopted the proposed budget and business plan which is annexed to this report. Furthermore it was agreed that the annual membership fee should be 5000 US$ for full members and 2500 US$ for associated members.
Insurance and the Environment – Emerging Issues Mark Mansley, Delphi International
Mr. Mansley stressed in his presentation that there are a number of links and opportunities in the area of insurance and the environment and it is of extreme importance for the insurance industry to identify and understand those links. New business opportunities might for example arise if insurance for conservation sites is requested or if new technological risks arise such as the risk of working with genetically modified organisms. On the other hand it is also vital for insurance companies to understand and assess the impacts environmental disasters such as oil spills, floods or storms might have on the insurance industry. Asset management which is an important part of the business of most insurance companies is becoming more and more effected by environmental issues. There is already some evidence that a positive relationship exists between environmental performance and the financial performance of companies. Now it is the right time to think more about environmental issues in investment strategies and it is appropriate now to start integrating environmental concerns into the whole portfolio. On the relationship between climate change and asset management Mr. Mansley stressed that portfolio exclusions for companies and sectors which consume a lot of energy or produce/use greenhouse gases are out of fashion. Nevertheless, for those concerned about climate change it is hard to justify investing in sectors which are known as environmental polluters. The Climate change issue also opens new opportunities for investment in such areas as technology development, project funding and energy efficiency finance. Mr. Mansley concluded with some remarks on a project for the European Commission on “Insurance and Environmental Policy”where he is involved in. The recommendations of this project may include a call for improved environmental information on a company level, recommendations for the financial sector environmental management standards and the call to support research and product development in this area.
Introduction to the Working Group on Climate Change Andrew Dlugolecki, General Accident
Mr. Dlugolecki opened his presentation by giving a brief background on climate change and the greenhouse effect. He stressed in his presentation that even small changes in the global temperature can have drastic impacts on the world’s climate, for example in the Ice Age the global temperature was only 5 C below today’s temperature. He also mentioned that in the past 100 years the global temperature rose by 0.6 C. After this general introduction the findings of the Intergovernmental Panel on Climate Change (IPCC), a panel of 2500 scientists which was set up jointly by UNEP and the WMO to assess the potential impacts of climate change, were presented. In its second assessment report the IPCC concluded that there is a discernible human influence on the world’s climate. The climate will not change equally in all regions, there are winners and loosers. There is evidence that more extreme weather patterns can be expected in certain areas. Even after the the publication of the IPCC Report there is still no full proof that climate change is happening but scientists give it a 90-95% likelihood. Mr. Dlugolecki said that even if there are some sceptic voices in the scientific community about the findings of the IPCC, the insurance industry should take the climate issue serious. The main reason for adopting a precautionary approach with respect to climate change is that once it has started it is almost impossible to stop and the impacts on the insurance industry can be dramatic. It does not only effect the property insurance companies through damages caused by floods and thunderstorms. Life insurers will be effected through heat waves and their health impacts or diseases which have not occurred in certain areas before, such as malaria. The next steps for the insurance industry should be to assist research on weather patterns. It is also vital for this sector to identify key hazards and to educate property stake-holders in risk avoiding strategies. Furthermore it is important for the insurance industry to create an international voice to influence policy makers and to lobby for emission control. Dr. Dlugolecki stressed that it is very important for the insurance industry to be involved in the next round of negotiations of the Climate Change Convention which will take place in Kyoto in December 1997. He mentioned that an important part of the work done in the Climate Change Working Group will be to develop another position paper on Insurance and Climate Change and present it to the delegates in Kyoto.
Introduction to the Working Group on Asset Management Tessa Tennant, NPI
In this session Ms. Tennant illustrated the extent to which there is increasing awareness of the role of the financial markets in sustainable development. There is a number of examples which underline her deliberations:
- The new UNEP Banking Statement now recognises that asset management as well as banking activities has a part to play.
- Policy-makers at the Rio +5 Meeting in New York are talking about the role of financial institutions.
- Evidence is emerging of workable investment strategies including the performance of some environmental and social investment funds, the DSI Index in the US and the evolving agenda for corporate governance.
That is the good news. The bad news, as we already know from UNEP’s report at the start of the year, is that society has still not turned the corner towards sustainability. Development patterns have to adapt significantly and business has to become more ecological. Ms. Tennant pointed out that there’s a great deal for asset managers to do. With respect to the work of the Asset Management Working Group the following options were proposed as possible areas of work:
- Share experience/raise awareness
- Influence policy
- Develop analytical tools
- Investment strategies
Summary of Discussions in the Working Groups
The discussions revealed the predominant concerns of the group which centred around three areas: Analytical tools and standards
Greatest interest was expressed in sharing information and developing methodologies for corporate environmental analysis, including environmental reporting standards. Real estate portfolio management
The environmental impacts of property portfolios can be significant and there is considerable scope for reducing impacts and encouraging best practice in building design and retrofit. Performance analysis of environmental portfolios
The analysis of volatility and other performance characteristics of environmental portfolios requires further refinement. It was agreed in the group that it is necessary to establish some working priorities. Therefore, the members were urged to communicate their views regarding the topics they would like to address first and how the Group should tackle the issues and what we might reasonably achieve by working together to Bernd Schanzenbächer at the UNEP Secretariat.
Climate Change Working Group
An overview by I. Knoepfel of the Insurance Initiative’s position at the Geneva Climate Summit in July 1996, as compared to the position of other business groups, was the starting point of discussion in the working group. The group agreed to prepare a position paper to be presented at the next round of negotiations of the United Nations Framework Convention on Climate Change
(UNFCCC) in Kyoto/Japan. The members of the Association will, at a workshop in Kyoto on 5 Dec. 1997, present their views on Climate Change related issues to the delegations, NGOs and the press. The importance of already announcing this at the Bonn negotiation round of the FCCC which will take place between 20-31 October 1997 was stressed. It was emphasized that the position paper should focus on the particular views and concerns of insurers, including notions of risk potentials and worst-case scenarios. Plan of Work
A. Dlugolecki and I. Knoepfel will prepare a rough draft of the paper and then circulate it to the group for further inputs and comments.