Nature positivity: the industry’s role in putting biodiversity on the path to recovery

A new report has called for the formation of a Nature-Positive Insurance Forum to engage key stakeholders in the development and advancement of nature-positive insurance approaches.

A new report has called for the formation of a Nature-Positive Insurance Forum to engage key stakeholders in the development and advancement of nature-positive insurance approaches.

The report – published jointly by the Principles for Sustainable Insurance and the United Nations Environment Programme Finance Initiative’s nature team – calls on insurers to take action through individual and collaborative efforts to halt and reverse nature loss so that by 2030 nature is “visibly and measurably” on the path to recovery.

The new study sets out the need for nature-positive insurance frameworks, guidance, tools, methodologies and standards.

The report said the creation of a forum can incentivise the creation of these initiatives by key stakeholders, including industry regulators and supervisors, nature-positive finance standard-setters, real economy actors, environmental and conservation groups, the scientific and academic community, and civil society.

The report has been published following the launch of the Global Biodiversity Framework, signed by 196 nations at last December’s COP15 Biodiversity Summit.

It calls for insurers to embrace a holistic approach to addressing both climate and biodiversity risks in order to maximise its ability to reduce the adverse social, economic and environmental impacts of nature loss on the insurance industry and the wider economy.

The report outlines several steps the industry can take to play its role, including contributing to the preservation, enhancement, and restoration of natural ecosystems, which in turn will help reduce the frequency and severity of extreme weather events such as floods, storms, wildfires and heatwaves.

Other steps highlighted include incorporating nature-related considerations into risk management and underwriting strategies and practices, using data and analytical capabilities to assess and monitor nature-related risks, and developing risk management services and insurance products that reduce and cover risks associated with biodiversity loss and ecosystem degradation.

“Recognising the value of nature and integrating it into risk management and underwriting strategies and practices can help insurers identify, assess, quantify, reduce and cover nature-related risks and promote sustainable development,” the report said.

“The insurance industry plays a vital role in understanding and managing financial risks associated with biodiversity loss and can contribute to closing the biodiversity finance gap.

“Insurers can facilitate capacity-building efforts and support the transfer of technical and scientific knowledge to enhance biodiversity conservation and sustainable development, particularly in developing countries and vulnerable regions,” it continued.

Over time, nature-related disclosures are expected to gain traction in policy and regulation, including financial regulation.

“These will particularly target large and transnational companies and financial institutions,” the report said. “By incorporating nature considerations into risk management and underwriting, developing insurance products that incentivise sustainable practices by clients, insurers can help reduce negative impacts on nature and support the transition to a nature-positive economy.”

To effectively integrate nature-related risks into risk management and underwriting frameworks, the report said insurers must first update their methodologies, models, and decision-making processes.

This will initially require a shift in perspective to recognise the significance of nature and its potential impact on insured assets and liabilities.

“This recognition must happen at both the industry and organisational levels, with senior management being key in championing the systematic integration of nature-related risks into fundamental insurance thinking and practices,” the report said.

The next steps will involve collecting and analysing relevant data and incorporating relevant indicators and metrics that capture the consequences of nature-related risks.

One recommendation is to leverage cat modelling tools to create parallel and developing nature scenarios, alongside collaboration with scientific experts, environmental organisations and industry peers.

To speed up and scale up nature-positive insurance thinking and practices, the report highlights four key steps: