Butch Bacani talks to Liz Booth about his ambitions for change in the insurance profession
Tell us about your role with the United Nations
After more than a decade in insurance and reinsurance in Asia, I moved to the UN in 2006 to lead both the insurance and investment global work programmes of the UN Environment Programme’s Finance Initiative. I then led the creation of the Principles for Sustainable Insurance (PSI), the largest collaborative initiative between the UN and the insurance profession.
Why is the PSI so important?
The PSI’s master narrative is to harness the full role of the insurance profession – as risk managers, insurers and investors – to promote economic, social and environmental sustainability. It is a global framework for the profession to address sustainability issues and to build resilient, inclusive and sustainable communities and economies on a healthy planet.
The PSI has buy-in at the highest levels. Furthermore, the PSI is constantly building a global community of practice – working together with chief underwriting officers, chief risk officers, chief investment offers, chief sustainability officers and other key insurance professionals, as well as with insurance associations, regulators and supervisors. We are approaching 200 members worldwide, including insurers representing more than 25% of world premium volume and $14trn (£10trn) in assets under management.
But we still have a lot of work ahead. We need to drive greater action, ambition and collaboration much faster. There is no time to waste.
What is the focus of the PSI this year?
The PSI is strengthening its contribution to the goals of the Paris Agreement in several ways.
Firstly, this year we will establish the pioneering Net-Zero Insurance Alliance (NZIA), which will cover insurance and reinsurance underwriting portfolios to support the transition to a net-zero emissions economy.
Secondly, we aim to build on the initial project we carried out last year that piloted state-of-the-art approaches – particularly the use of climate-change scenarios – to better assess climate-related physical, transition and litigation risks in the insurance business, in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).
I hope governments around the world commit to implementing urgent and ambitious climate action and set the policies and frameworks needed. This will enable companies in the real economy and financial markets to do their part
Thirdly, we are working with the Vulnerable Twenty Group of Finance Ministers (V20) – comprising 48 climate-vulnerable economies with a combined population of 1.2 billion people – to create a V20 Sustainable Insurance Facility that would help meet the financial protection needs of micro, small and medium-sized enterprises and build resilience to the impacts of climate change.
Furthermore, we are supporting the achievement of the Sustainable Development Goals (SDGs) through an agenda-setting global initiative to develop ‘Insurance SDGs’. Key actions here include defining what sustainable insurance business is in the context of the SDGs, mapping insurance portfolios against the SDGs, and setting targets at the insurance portfolio level to contribute to Insurance SDGs at the global level. Early ideas include targets that would scale up agriculture insurance for smallholder farmers, as well as health insurance and insurance for natural ecosystems; and reduce carbon emissions with respect to motor and property insurance portfolios.
What do you hope will come out of COP26?
I hope governments around the world commit to implementing urgent and ambitious climate action and set the policies and frameworks needed. This will enable companies in the real economy and financial markets to do their part.
We are working with the COP26 Private Finance Hub, led by Mark Carney in his dual capacity as the UN special envoy on climate action and finance, and the UK Prime Minister’s finance adviser for COP26.
Mr Carney is highly supportive of the PSI’s work, from implementing the TCFD recommendations to the NZIA.
For private markets to anticipate and smooth the transition to a net-zero world, they need the right frameworks across reporting, risk management and returns. He believes that, by COP26, these frameworks must be built so that every professional financial decision takes climate change into account.
This is also the reason why the NZIA intends to join the COP26 Race to Zero campaign and become part of the Glasgow Finance Alliance for Net Zero (GFANZ). Launched last April, GFANZ brings together existing and new net-zero finance initiatives – across banking, insurance and investment – into one financial sector-wide strategic
forum, and will work to mobilise trillions of dollars to build a global zero-emissions economy and deliver the goals of the Paris Agreement.
Finally, I do hope that COP26 will lead to much, much more climate financing – both public and private – to help developing countries adapt to climate change and reduce disaster risk, as currently this is woefully inadequate. Adaptation finance needs to urgently increase, especially in the poorest, most climate-vulnerable countries and amid the widespread socioeconomic damage caused by the Covid-19 pandemic. In short, adaptation must not and should not be the forgotten component of climate action.
Mr Bucani is programme leader at the UN Environment Programme’s Principles for Sustainable Insurance Initiative.
He has shaped global insurance initiatives to address climate change, disaster risks, tobacco risks, illegal fishing and plastic pollution.
He collaborated in creating sustainable insurance and finance strategies in Egypt, Costa Rica, Lagos, Australia, New Zealand and California.
Liz Booth is contributing editor of The Journal