Lloyd’s takes action to accelerate transition to sustainable economy

Lloyd’s has launched a report which sets out its plans for accelerating the transition to a more sustainable insurance and reinsurance marketplace. Lloyd’s Environmental, Social and Governance Report 2020 builds on Lloyd’s existing ESG work with a comprehensive market-wide strategy that aligns with the United Nations’ Sustainable Development Goals and supports the principles set out in the Paris Agreement. 

The report highlights ongoing work to drive culture change across the Lloyd’s market. This includes commitments to meaningful and measurable actions to build a more inclusive working environment such as establishing Lloyd’s Culture Advisory Group and the setting of gender targets during 2020, and ethnicity targets to be announced in 2021.

The report also sets out a range of existing and new initiatives in support of the global transition to net zero. Lloyd’s Corporation will allocate 5% of Lloyd’s Central Fund for impact investments by 2022, and will set a roadmap for transitioning to net zero for its own operations by 2025.

In the context of the wider Lloyd’s market, for the first time, Lloyd’s has announced publicly accountable targets for responsible underwriting and investment, developed following feedback from and in consultation with Lloyd’s market practitioners. These include a target for 2% of premium income to be derived from innovative and sustainable insurance products by 2022. Timescales are also set for the market to phase out insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities to help accelerate society’s transition from fossil fuel dependency towards renewable energy sources.  

In the run-up to the United Nations Climate Change Conference (COP26), to be held in Glasgow in 2021, Lloyd’s will also consider how else the insurance sector can best support the global effort to address climate risk, and respond to UK Government’s Ten Point Plan for a green industrial revolution..

Summary of Lloyd’s ESG commitments:

  • Lloyd’s will continue to drive culture change in the Lloyd’s market through the provision of practical guidance including the Cultural Toolkit, and the setting of regularly measured targets. These include a phase one target of 35% female representation in leadership positions across the market (to be achieved by 31 December 2023), and new targets for Black and Minority Ethnic representation in leadership positions to be announced in 2021.
  • Lloyd’s will encourage all insurance undertakings in its market to allocate 2% of annual premiums towards innovative and sustainable products by 2022, and will provide guidance to deliver on this ambition.
  • Lloyd’s will develop a new risk centre, to be launched in 2021, and will undertake research into new insurance products to protect society from systemic risks, including climate risk.
  • Lloyd’s is targeting a 5% allocation of the Central Fund to impact investments by 2022.
  • Lloyd’s will end investment in thermal coal-fired power plants, thermal coal mines, oil sands and new Arctic energy exploration activities. This involves ending new investments in these areas by Lloyd’s market participants and by the Corporation, from 1 January 2022, and the phasing out of existing investments in companies with business models that derive 30% or more of their revenues from thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities by the end of 2025.
  • Lloyd’s will publish a road map that will set out how the Corporation will become net zero in its operations by 2025, and will work with the market to support their own implementation of net zero emission plans.
  • Managing agents in the Lloyd’s market will be asked to no longer provide new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands, or new Arctic energy exploration activities from 1 January 2022. To enable the market to support their customers as they transition their businesses, the target date for phasing out the renewal of existing insurance cover for these types of businesses is 1 January 2030 (including for companies with business models which derive 30% or more of their revenues from any of these activities). Lloyd’s will consult with the market and policyholders and provide ongoing support and guidance during this period of transition.

Bruce Carnegie-Brown, Chairman of Lloyd’s ESG committee and Chairman of Lloyd’s said: “This is the first time we have set an ESG strategy for the Lloyd’s market and it represents an important milestone on the journey towards building a more sustainable future. We have the opportunity to play our part in building back a braver, more resilient world. We recognise that the targets we are setting will be challenging, but will also bring new opportunities. We will work closely with our market and customers to help them plan for these changes as we implement a long-term managed programme towards sustainable, responsible underwriting.”

Andrew Brooks, Chairman of the Lloyd’s Market Association said: “We are fully supportive of Lloyd’s ambitions to set out a path in which the market can work together to support our customers globally on their transition to a more sustainable future. As a market we must act decisively now and play a more effective and proactive role in supporting positive societal change.”

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