Canadian Life Insurance Companies Make Strides on Environmental Commitments

DBRS Morningstar published a commentary describing recent efforts made by the four largest Canadian life insurers in improving the sustainability of their operations, specifically with respect to environmental risk. In the past few years, there has been material progress made in terms of understanding and evaluating the impact of climate risk on the life insurance business model, initiatives undertaken to mitigate the impact of operations on the environment as well as an increase in financial commitments made toward green initiatives.

Key highlights include

-- Despite a relatively low vulnerability to climate risk, Canadian life insurers are increasingly making understanding and tackling environmental risk a priority, as evidenced by their support for major global environmental frameworks and green initiatives.

-- While progress on the asset management front is more challenging, significant steps have been taken to reduce the environmental impact of operations, including a focus on carbon neutrality and reducing the intensity and absolute value of greenhouse gas emissions.

-- Canadian life insurers have issued green and sustainability bonds, increased their commitments to renewable energy investments, and introduced more environmental, social, and governance (ESG)-related product offerings through their asset management subsidiaries.

“While the life insurance business model is not as vulnerable to climate risk as other industries, Canadian life insurers have nonetheless made considerable efforts in recent years to address environmental risk as part of their commitment to ESG principles. In particular, the insurers have been successful in mitigating the environment impact of their operations, for example, by materially reducing and/or offsetting greenhouse gas emissions, and have also increased their investments in green and renewable energy. Integrating environmental considerations into asset management operations has been more challenging, even as progress has been made in terms of increasing the number of sustainable fund offerings, and in incorporating climate risk assessment in the investment analysis process.” said Komal Rizvi, Vice President, Insurance.