Page 41 - The Insurance Times July 2025

power in directing capital towards sustainable outcomes. Opportunities and the Road Ahead
Globally, insurance companies are aligning with frameworks
The ESG-insurance convergence offers several long-term
like the UN Principles for Sustainable Insurance (PSI) and Net-
opportunities:
Zero Asset Owner Alliance to reshape their investment
Risk Differentiation: ESG scores can improve risk pro-
mandates.
filing and differentiate good risks from bad, allowing for
more accurate underwriting.
In India, insurers are increasingly investing in:
Green bonds issued for climate-resilient infrastructure Brand Reputation: ESG-oriented insurers are more
likely to attract Millennial and Gen Z customers who
Sustainable mutual funds with ESG benchmarks
prioritize ethical financial choices.
Impact funds focusing on healthcare, financial inclusion,
Global Capital Flows: ESG-compliant portfolios may at-
and rural development
tract foreign investment, especially from global devel-
opment finance institutions (DFIs) and climate funds.
Although ESG investment regulations are still evolving in
India, the Insurance Regulatory and Development Author- To unlock this potential, India's insurance sector must:
ity of India (IRDAI) is expected to issue ESG-linked invest- Encourage IRDAI to develop ESG-specific underwriting
ment guidelines, especially under the GIFT City financial guidelines.
ecosystem and upcoming risk-based capital frameworks. Promote industry-wide ESG data sharing platforms.

Incentivize insurers to disclose climate risk exposure
Challenges in ESG Integration under Task Force on Climate-related Financial Disclo-
Despite momentum, ESG integration in insurance is not sures (TCFD).
without challenges:
Data Gaps: There is limited availability of high-quality, Conclusion
granular ESG data in emerging markets like India.
As ESG becomes a central pillar of financial systems world-
Standardization Issues: ESG scoring models vary, lead- wide, the Indian insurance sector must accelerate its tran-
ing to inconsistent underwriting and investment bench- sition from reactive adaptation to strategic leadership. By
marks. embracing ESG-linked premiums, aligning investment port-
Awareness and Capacity: Many Indian insurers still lack folios with sustainability goals, and innovating green prod-
the technical capacity to fully assess ESG risks or design ucts, insurers can not only protect but also propel a greener
appropriate pricing models. and more inclusive economy.

Moreover, there's a concern of greenwashing, where insur- The future of insurance is not just about covering risk-it's
ers promote ESG credentials without substantive impact-a about reshaping risk itself in alignment with planetary and
risk that needs regulatory oversight and industry account- societal goals. "Greening the policy" is no longer optional-
ability. it's a defining mandate for 21st-century insurers.

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