ClimateWise, which is part of the Cambridge Institute for Sustainability Leadership (CISL), in collaboration with two of its members, Howden, the global insurance intermediary group, and MS Amlin, Lloyd’s global insurer and reinsurer, have developed nature-related financial opportunity use cases.
In alignment with the Kunming-Montreal Global Biodiversity Framework (GBF), the financial flows reportedly have to be redirected towards financing a “nature-positive economy” by 2030.
However, in order to achieve this, nature needs to be fully integrated into mainstream financial decision making, in regards to mitigating nature-related financial risks, as well as pursuing financing and insurance of nature-based solutions.
Dr Nina Seega, Director of the Centre for Sustainable Finance at CISL, commented: “The insurance industry is absolutely key for enabling investment into nature. These use cases demonstrate how insurance products can be used to support emerging markets and developing economies in building resilience to climate and nature-related financial risks and paving the way for a more sustainable and resilient economy overall.”
Looking at Howden’s use case first, the company focused their attention on the Philippines, a country which faces major climate-related risks such as typhoons and storm surges, and increasing insurance coverage presents an insurability challenge.
From what we understand, Howden’s use case explored the role of insurance in enabling Nature-based Solutions (NbS) to protect marine ecosystems and enhance coastal community resilience.
Primarily focusing on Bolinao’s mangroves, corals, and seagrass beds, the use case was able to identify several insurance solutions that are available to build long-term resilience through premium reductions and sustainable financing.
Overall, Howden’s use case clearly emphasised the need for policies that will protect natural assets, requiring an enhanced duty of care by the insurance market, inclusivity, and understanding local socioeconomic conditions.
Daniel Fairweather, Director of Food Systems and Biodiversity, Climate Risk and Resilience, Howden, said: “Coastal communities and marine ecosystems are intrinsically linked, with severe weather and climate events causing disruption to both. This report identifies a role for insurance in building resilience in coastal communities and the marine ecosystems supporting them. Access to insurance and finance can incentivise environmental stewardship and risk management to help build both climatic and financial resilience, supporting those communities and livelihoods most exposed to climate change.
“This report should help inform investors, insurance practitioners and risk managers about the importance of ecosystems and nature in protecting and supporting economic activity in some of the most climate exposed regions and sectors.”
Moving towards MS Amlin’s use case now, the Lloyd’s re/insurer focused theirs on Ecuador where its geographical positioning at the nexus of rich marine ecosystems underscores the region’s importance for marine conservation.
In order to address key issues, including overfishing and habitat degradation while alleviating current financial pressures, MS Amlin’s use case profiled a Debt-for-Nature Swap (DfNS) initiative.
It is important to note that Ecuador’s deal is the world’s largest to date, cutting the country’s debt by over USD 1 billion.
It is clear that the success of Ecuador’s DfNS showcases the transformative potential of finance in sustainable development.
Furthermore, Ecuador’s DfNS initiative may also possibly serve as a model for other countries that are facing similar challenges too.
Amir Sethu, Head of Sustainability, MS Amlin, added: “Our involvement in Ecuador’s debt-for-nature swap highlights the growing role insurers can play in opening new doors for innovative nature-based financing and the intrinsic link between nature, climate change, social and economic development goals. As experts in handling the world’s most complex risks, the Lloyd’s market can help unlock capital flows for crucial conservation projects that protect biodiversity and build resilience to climate impacts. By collaborating across sectors and pooling expertise, we can mobilise investments on a scale no individual organisation could achieve alone.”
In related news, ClimateWise recently updated its reporting framework Principles to “help insurers prepare for an evolving disclosure environment.”
