We are the voice of insurance and long-term savings | Contact us

Pillar Four: Helping Society Adapt


Alongside the commitments relating to our sector’s own activities and operations (set out in the first three pillars of our Climate Change Roadmap), our members can also play a wider role in helping the customers and stakeholders that we work with adapt to a changing climate.

This means both helping customers make decisions that will reduce their own carbon footprint and also helping customers with the economic and societal changes that will arise as a result of climate change.

We want to focus on the key ‘touchpoints’ that our industry has with customers, clients and stakeholders – and make every one of these as sustainable as possible.  

On top of the innovative products that will come from individual ABI members, the growing insurtech community and potentially from new entrants into the sector, there are some key areas where we believe our sector can have a unique impact.

There has already been work across the sector to show where there is potential for further product development, including ClimateWise’s paper on Product Innovation within the Insurance Sector and the work of the Sustainable Markets Initiative’s Insurance Task Force to produce a ‘Products and Services Showcase’ 

Our members are taking a range of actions to help their customers make more sustainable choices and navigate the growing number of ‘green’ choices available to them.

Examples of support that our members are offering to their customers include:

  • A group of ABI members are among the first set of firms to offer homeowners the chance to install Property Flood Resilience measures (up to the value of £10,000) when repairing their properties after a flood, as part of Flood Re’s Build Back Better initiative.
  • Pension providers are simultaneously integrating climate change and ESG factors into default funds and also developing a range of tailored sustainable funds customers can choose.
  • ESG online tools and calculators that allow savers to make informed decisions about the carbon impact of their investments
  • Developing tailored insurance products for Electric Vehicles and incentives for more sustainable driving within existing motor insurance policies
  • Incorporating ‘Green Parts’ when settling motor claims (rather than always using brand new parts)
  • Providing tailored information on EPC ratings and how homes can be improved to become more energy efficient, and provision of smart devices and sensors to help people reduce energy use
  • Risk management tools aimed specifically at SME customers

Areas that we intend to particularly focus on as we work with the Government include:

Data and Evidence  

Our members continue to work to collect right data from across their client base and underwriting/investment portfolios to inform decision making and risk management. In particular, we will focus on learning from the findings of the Bank of England’s Climate Biennial Exploratory Scenario (CBES).  

More consistency in the datasets used will make scaling product offerings and investment opportunities easier.  

We welcome the Government’s ongoing work to consider the regulation of ESG Rating providers – as this will help everyone have confidence that information provided to the market, which in turn informs how our members structure their product offerings, is reliable and consistent.  

The work of PCAF on insurance-associated emissions is provided general insurers with a consistent approach that can be used to set their targets. We provided a detailed response to the PCAF’s 2022 consultation on this topic and has subsequently hosted a member roundtable to ensure firms understand this developing methodology. We will continue to work with PCAF as they refine this approach and extend it to further lines of insurance business.  

Adaptation and Resilience

Even if we meet the goal of keeping temperature rises to 1.5°C, the UK will need to adapt to a greater number and greater severity of extreme weather events, especially flooding.  

More focus needs to be given to designing financial products that help people who live and work in locations most exposed to this risk.  

Recent innovations such as Flood Re’s Build Back Better initiative are evidence of our sector taking action, but we need to do more to prioritise investment and incentivise the right solutions. 

We are engaging with Defra, the Climate Change Committee and others as they consider this. Our sector has a key role to play in: 

  • Helping to quantify the ‘avoided costs’ that can be used to justify investments  
  • Providing risk management services to prioritise which resilience measures will have the most impact 
  • Advising customers on the long-term steps they can take to improve the resilience of their homes and businesses 
  • Offering guidance to customers on key steps to take during periods of extreme weather  

Ensuring a 'just transition'

It is also important to align Net Zero transition policies with the wider societal benefits that come from a Just Transition.  

We gave oral evidence to a meeting of the Scottish Parliament’s ongoing enquiry into the Just Transition in the Grangemouth Area in March. This inquiry is focussed on a  particular region, but the questions during the session were wide-ranging and we used this to outline the wide range of methods through which our members can ensure a just transition.  

  • Since our 2022 Climate Summit, the ABI has now launched a DEI Blueprint. We are committed to ensuring our focus on these two areas operates in parallel, as there is increasingly compelling evidence showing how companies with inclusive cultures make better decisions on climate change. 
  • There are a number of areas where insurers can make a unique contribution to this agenda, including: 
    • Consistency in different local authority areas can scale up investment opportunities in new technology so they are available across the whole of the UK
    • Investment in skills across our extensive nationwide supply chains, through both formal apprenticeships, learning and development 
    • The value that Protection products (such as income protection insurance) can play in given security to people who work in sectors that will experience change during the transition 
    • Ensuring that consumers are incentivised to choose more sustainable options when making a claim or though the assessments we use to define risk 

Labelling and Disclosures

A key element of ensuring that customers can make the right choices is a consistent disclosure and labelling regime.  

We have engaged constructively with the FCA’s work in this area and look forward to responding when the final policy statement is published in Q3 2023 

We welcome the intention of the FCA to tackle greenwashing and to ensure consumers are provided with information that enables them to make informed and effective decisions.  

We do not endorse any form of ‘greenwashing’ – when our members set Net Zero targets, publish transition plans or make other environmental commitments, these should be transparent and based on meaningful engagement with independent scientific experts. 

We are broadly supportive of the key proposals the FCA have made. However, we highlighted some areas that we consider require clarification or pose practical problems as currently proposed. For example, the inclusion of new disclosures in circumstances where firms are not seeking to use labels appears unnecessary and not aligned with the purpose of such disclosures. We are also not supportive of the proposed marketing rule in its current form and consider a principles-based approach would better meet the outcomes the FCA is seeking while providing additional flexibility to firms. It is welcome that the FCA’s policy statement has acknowledged these as areas they will consider further as they refine their proposals. 

Incentivising Consumer Choices

Consumer choices and demand are an evolving picture. There is a growing evidence base that the majority of consumers want their insurance and long-term savings providers to offer more sustainable choices, while a significant minority would even be prepared to compromise on price/fees or likely investment returns to do so.  

Examples of recent research in this area: 

  • A Viewsbank survey conducted by Consumer Intelligence found that 81% of consumers wanted their insurer to be environmentally friendly and 22% would be prepared to pay more for a policy that helped the planet.  
  • A nationally representative survey with over 2000 consumers conducted shortly before COP26 by Britain Thinks, 30% would prefer to be invested in a sustainable pension, even if it doesn’t perform as well as other funds.  

However, at present, consumer understanding of the range of sustainability options available to them from our sector is still developing.  

For example, research from Scottish Widows showed that 28% of people remain unsure what a green or sustainable pension is.  

Research conducted by Britain Thinks as part of their Net Zero diaries shows people tend to see personal lifestyle choices (such as recycling, transport and energy use) as the biggest impact they could have on emissions – consumers do not cite changes to their financial choices, despite research from Aviva/Make My Money Matter that this could have 21 times as much impact on a typical carbon footprint as all these lifestyle choices combined . Scottish Widows’ research found that only 10% say that changing their pension choices has impacted their carbon footprint.  

In the short-term, raising consumer awareness and understanding of the role our sector can play in the transition is a challenge for the insurance and long-term savings sector.  

Consumers will need to be persuaded that accepting ‘green parts’ (i.e. recycled and re-used motor parts, home appliances and furnishings) does not impact reliability, safety or hygiene. Savers will need to be persuaded that ‘green pensions’ and other green pension products can support their long-term financial security.  

However, in the long-term, the growing interest from consumers in these products represents a considerable opportunity for the sector to develop innovative products that utilise the UK’s status as a world-leader in green finance. 

Stewardship and engagement  

The Government has confirmed in its Green Finance Strategy that there will be a review of the regulatory framework for effective stewardship. This review will include a review of the effectiveness of the Stewardship Code. We look forward to more details of this review being published and will contribute fully to it. 

In our assessment, the practice of investor stewardship is evolving rapidly and there are an increasing number of examples of good practice found in the stewardship reports published by our members. 

Therefore, the UK should aim to build on the existing Stewardship Code and make the processes it has encouraged more effective rather than fundamentally alter the approach. 

Areas that could be considered include: 

  • Developing additional guidance on how stewardship reports are drafted to make them more accessible and cross-comparable (without limiting the ability of firms to link their reporting to their own organisational purpose and the priorities of their customers/policyholders) 
  • Facilitating the sharing of best practices between firms and sectors, utilising the model that already works effectively through the FCA/PRA Climate Financial Risk Forum (CFRF) 
  • Additional guidance designed specifically for smaller firms and providers, particularly for those asset owners whose stewardship activities will typically be conducted through third parties (such as asset managers) 
  • Guidance for investors on how they can interpret and scrutinise the net zero transition plans and other sustainability disclosures published by companies they invest in. 

Collaborative networks are proving to be increasingly effective. Examples include: 

  • The Climate Action 100+ updated Company Benchmark provides a comprehensive assessment tool that investors can use to inform their stewardships. 
  • The Financial Sector Deforestation Action (FSDA), a new investor working group which focusses on the implementation of the Financial Sector Commitment Letter on Eliminating Commodity-Driven Deforestation and works on a similar basis to the CA100+ 

Stewardship is not an ‘exact science’ where the impact of every interaction can be measured on an annual basis. The most effective stewardship strategies utilise a range of formal and informal levers and create an environment for change that occurs over time. 

Firms should not be penalised for focussing on encouraging cultural changes (such as reforms to governance), even where these are harder to measure with quantifiable metrics. It is important that the incentives used to encourage and measure effective stewardship do not have the unintended consequence of emphasising short-term ‘reportable’ changes over more impactful long-term change. 

Balancing our commitment to Net Zero with the need for energy security  

The UK’s long-term energy security needs are aligned with the Net Zero agenda, especially through the need for sustained progress on energy efficiency while maximising the UK’s significant comparative advantages in renewable energy generation. 

The Government can play an enabling role in ensuring that innovation in the energy sector is matched with innovation in the investment structures used to finance these developments. This requires connecting the significant institutional investment capacity of ABI members with those responsible for designing and planning energy projects.  

There is considerable appetite from across the ABI membership to invest in these projects – this is more likely to succeed if our sector is actively involved while projects are being designed and developed,  

To make investments, ABI members will rely on regulatory approval and therefore it is vital that regulators are pro-active and are ready to confirm their assessment of new asset classes (especially those identified as strategically significant) as soon as they come to market. 

The ABI and its members remain committed to working constructively with the Goverment to play our part in delivering its Net Zero strategy and helping make the UK a world leader in 'green finance'.

We have identified five key actions for Government to maximise the impact our sector can have:

  • Strengthen the industry's role as key investors in Net Zero infrastructure: let us put more of our capital into green investments and ensure we are central to the conversation about how renewable energy and other green infrastructure is developed and funded. Unlock the significant investment potential from the insurance and long-term savings industry through meaningful reform of the Solvency II regulatory framework, identifying opportunities to unlock our sector's capital (in particular enabling investments from DC pensions into private markets) and bring investors into the heart of the decision-making process on green infrastructure and technology development.

  • Publish a strategy for delivering the required investment in reducing carbon emissions in homes and commercial buildings. The UK has a strategy to decarbonise the entire transport system - we need Government to set out the same clarity on targets for the UK's building stock that delivery energy efficiency and low carbon heating without increasing any building safety risks. This can enable the sector to support not just lower emissions but lower bills and warmer homes.

  • Improve the planning system to ensure Net Zero alignment, by reducing development in high flood risk areas and ensuring new homes are resilient to climate risk. This must be underpinned by a long-term funding commitment to investing and maintaining the UK's flood defense infrastructure.

  • Ensure all sectors product consistent and quality data on carbon emissions. Businesses can not accurately calculate progress towards Net Zero targets without consistency across the carbon emission data published across their full portfolio.

  • Put the protection of the natural environment and our ecosystems into climate change policies. Net Zero targets alone are not enough, as protecting the natural environment is equally important. The Dasgupta Review sets out how we can achieve sustainable growth whilst ensureing the demands on Nature do not exceeed its supply. We need Government guidance on how businesses should respond to this - customers and international regulators are asking us.