Green billions waiting to be unlocked

UK insurers hold over £1.8tr in invested assets, and there are also trillions more managed by investment firms and banks. At the moment, only around 1.2 per cent of all these assets under management in the UK are invested in ESG assets.

However, the Association of British Insurers (ABI) is now proposing ways to address the barriers to investment, such as a shortage of high-quality and consistent data and a focus on one-year solvency (the current prudential regime for insurers). The Solvency II rules effectively disincentivise insurers from investing in the kind of long-term, sustainable projects that could help mitigate the impacts of climate change.

On data availability, the ABI says there is a role for the regulators to play across the full breadth of the financial sector to help improve the availability and consistency of data relating to the firms and initiatives insurers may want to invest in.

Regarding the regulatory regime, the ABI is proposing more is done to take sustainability factors into account when considering assets, particularly given the good match between longer-term investments and insurers’ long-term liabilities. Enabling this should be a key focus of the Solvency II 2020 review which is just getting underway, and is something the UK could take steps on independently once we leave the EU.

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