On the current stage of implementation of the environmental principles of the ESG by the largest insurers in Western Europe

Okhrimenko Igor' Viktorovich ORCID: 0000-0002-5688-287X PhD in Economics Senior Researcher; Institute of Financial Research of the Financial University under the Government of the Russian Federation 49/2 Leningradsky Ave., Moscow, 125993, Russia okhrimenko_igor@mail.ru Other publications by this author

The article was prepared as part of the implementation by the Financial University under the Government of the Russian Federation of fundamental research work within the framework of the 2024 state assignment on the topic: "Insurance in ESG" (Stage III).

Introduction

Socio-economic processes in the modern world are increasingly oriented towards the principles of sustainable development ^{[1, p. 429]}. Their foundation was laid in 2015 by the adoption of the concept document "Transforming our World: The 2030 Agenda for Sustainable Development" at the session of the UN General Assembly. One of the basic elements of the agenda is environmental risk management, which in practice is carried out by introducing measures and measures into their activities by business entities that meet the principles of the ESG concept (from the English Environmental, Social, Governance)^{[2, p. 54]} to preserve the environment for future generations.

For representatives of the insurance market, the formation of the environmental component of the future concept began a little earlier and eventually expressed itself in the Principles for Sustainable Insurance (PSI), a document developed under the auspices of the United Nations in 2012. More than 160 organizations from four dozen countries of the world are among the signatories (Russia is not represented among them).

If in foreign countries with a developed insurance culture, the introduction of ESG principles into the activities of insurance companies is widespread and already familiar ^[3-5], then the Russian market in this direction is still quite passive ^{[6, p. 8]}. The proactive adoption of ESG principles by domestic insurers is rare ^[7-8] and, in their opinion, not a necessary enough process ^[9-10]. It seems that the main reason here lies collectively in the absence of requirements and recommendations from the state, the positions of insurers who, if not deny the ESG concept, then take into account last of all, and the masses of consumers of insurance products who do not classify environmental issues as a priority ^{[11, p. 154; 12]}.

We know that economic history has cyclical characteristics, among other things. So, more than thirty years ago, the domestic insurance industry radically changed its essence due to political reasons. At that time, in crisis conditions and in the absence of a choice, the experience of foreign countries was a model for the formation of a new insurance market and a future insurance culture. The realities of our time are completely different – Russia today has a developed, protected economy and an independent position in the international arena. The stage of formation of the modern Russian insurance market, which today represents an established system with minor elements of changes, has already been completed. At the same time, without any more striving to rely dogmatically on foreign experience, we demonstrate our readiness for self-development and selective assimilation of the most positive, useful and advanced in it. Good environmental conservation activities can undoubtedly be attributed to this category.

The prospect of Russia joining global environmental trends seems to the author to be quite close ^[13-14], in connection with which interest is expressed in relation to eco–initiatives represented in the leading European insurance markets - it is assumed that similar prospects await us soon. This study examines the environmental measures and activities undertaken by the largest players in the Western European insurance markets in their activities.

Materials and methods

The subjective (or purely targeted) side of the study is to consider the practical measures of the largest Western European insurers to implement the environmental principles of the ESG concept in their own activities. At the same time, the process of formation in the global (actions are being carried out in relation to certain world territories, cross-border areas of activity, etc.) insurance culture space within the framework of the environmental segment of the ESG concept can act as an object.

In the course of the study, theoretical (analysis and generalization of the presented materials and knowledge in the field of interest) and private (assessment of information provided in the public domain, consideration and evaluation of expert opinions, as well as observation and description aimed at and the development of summarizing conclusions) methods of study were used. The materials for the study were the reporting data of the largest insurers in Western Europe, as well as expert assessments of scientific and practicing specialists in the field of research of interest.

Results and discussion

The works of a number of domestic and foreign scientists and practitioners in the insurance industry are devoted to the issue of bringing the activities of insurance companies in line with the environmental principles of the ESG concept. In the accumulated research array, the problems of developing relevant insurance products that meet both the interests of consumers (representing mainly the agro-industrial complex) and the national environmental protection policy prevail. Thus, the legal aspects of the development of relevant insurance products are the subject of research by K.S. Akimova, D.A. Afanasiev, P.P. Battakhov, R.M. Magomedova, A.V. Malyshenko, Y.S. Ovchinnikova. The practical aspects of this activity, including the development of a system of mutually beneficial cooperation between insurance companies and consumers of their services in the field of environmental insurance products, are considered in the works of A.S. Ermolaeva, N.V. Kirillova, I.L. Logvinova, A.A. Tsyganov, R.T. Yuldashev and others. For all its diversity, unfortunately, the research relies only to a small extent on foreign best practices - for example, a practical study of environmental insurance products existing abroad can be found, for example, in the works of V.D. Bogatyrev, N.Yu. Vaulin, E.P. Rostova.

For other domestic researchers, the issue of bringing the management activities of insurance companies in line with the environmental principles of the ESG concept and their participation in the implementation of the "green agenda" in the economic system is of scientific interest. The works of O.L. Konyukov, N.M. Korchebny, G.A. Motkin are devoted to the general principles of the development of environmental insurance in Russia. Yu.A. Knats pays attention to the relationship between the environmental activities of insurance companies and public administration, the role of environmental insurance in the country's security system is devoted to the works of V.A. Aleynikova, T.A. Belova, E.V. Novikova, and N.M. Mityakin; in the context of economic sustainability, N.V. Danilov and L.S. Krutov consider the issues of interest; state risk management - E.A. Pichugin, Yu.A. Gossipukhov, A.N. Fomichev, M.V. Cherepanov; investment activity - D.A. Egorova, taxation - M.V. Romanova, N.V. Danilova, E.N. Egorova, V.V. Lesnykh, I.E. Shinkarenko. Their research, as well as the works of the above-mentioned colleagues, rely on foreign experience to a clearly insufficient extent. Despite the fact that this topic has become an object of scientific interest for such foreign scientists as N.S. Ananenko, T. Bowley, L. Du, L. Zhang, M.A. Zaitseva, L. Stricker, J. G. Hill, H. Shu, L. Yu and others, who have formed a significant research base in this direction.

Thus, the study of environmental insurance by domestic specialists significantly loses, relying on international experience to an insufficient extent. Against the background of the projected imminent accession of the domestic insurance market to the "green agenda", it seems advisable to study the experience of the largest insurance companies in Western Europe, a region with a developed industry culture, which in many ways form the global insurance market.

For the largest insurers in Western Europe, the implementation of the environmental principles of the ESG concept in their own activities is not mandatory or legally established ^[15]. At the same time, the conceptual Principles of sustainable insurance in 2012 have not been adopted by a number of Western European insurance companies of various levels and industry orientation. Practice rather cynically shows that joining the ESG concept occurs rather within the framework of a trend formed in the market and unspoken corporate ethics, is a reaction to the attention to the environmental aspect on the part of consumers of insurance services ^{[16, p. 230]}.

In the absence of formalization, the largest Western European insurers are independent in their actions and demonstrate individual variations of adherence to the environmental principles of the ESG concept. Their assessment, among other things, allows us to draw conclusions as to how these principles affect the system of culture formation within the environmental segment of the ESG concept.

Thus, the German insurance group Allianz (www.allianz.com ) climate conservation has been chosen as a priority area of environmental activity over the years and assistance in limiting global warming to 1.5 °C. is declared. To do this, the following ESG approaches have been introduced into the company's activities over the years, which the public is informed about:

- consideration of climate and carbon risks;

- consideration of ESG criteria for non-listed assets (infrastructure and real estate);

- Taking into account ESG criteria, including carbon emissions, climate change, governance, energy efficiency and environmental impact, to evaluate stocks and bonds;

- Phasing out investments in coal-based business models starting in 2015;

- refusal to insure coal-fired power plants and mines;

- working with clients to find joint solutions for the transition to a low-carbon economy;

- Addressing gaps in protection against climate risks in countries most vulnerable to climate change;

- Stimulating public initiatives to provide insurance solutions that enable governments to better protect their citizens from natural disasters;

- investing in "low–carbon" assets - renewable energy sources, low-carbon technologies and "green bonds";

- reduction of emissions from own activities and implementation of the insurance group's investment portfolio.

The Allianz Insurance Group's corporate report on sustainable development for the past year contains information on the financing of programs under the ESG concept – its volumes amounted to 849.2 million euros in 2021, 701.1 million euros in 2022 and 736.8 million euros in 2023. An article-by-article assessment of the financing conditions shows that climate conservation programs prevailed within its framework – in 2021 their total cost amounted to 123.1 million euros, in 2022 131.5 million euros and in 2023 167.4 million euros. A fair share of the Allianz insurance group's environmental programs among all those implemented by it within the framework of sustainable development (15.5%, 18.8% and 22.7%, respectively), as well as the annual increase in their importance in the total amount of financing, suggest that this is the largest insurance company, largely shaping the industry market and insurance culture in Western Europe, maintains consistency in its efforts and successfully acts for the benefit of climate conservation, attracting significant forces and resources (both its own and public ones) for this purpose.

Together with the Allianz Insurance Group, other major Western European insurance and reinsurance companies, Munich Re, Swiss Re, Zurich, SCOR, AXA, have also decided to terminate insurance of coal power plants and mines and phase out coal industry insurance from their portfolio.

German reinsurance company "Munich Re" (www.munichre.com ), like their colleagues from Allianz, which widely finances sustainable development programs (only investments in the most relevant "green bonds" and programs for renewable energy sources and forest areas in 2023 totaled 8.7 million euros; the average increase compared to 2022 is 40%) and setting goals for the future (for example, reducing the level of interaction with coal consumers and oil sands developers by 35% by 2025, completely eliminating it by 2040), concentrates its efforts on information and analytical support for risk management, primarily climate risks. The company's capabilities in climate change forecasts and disaster prevention are based on fifteen years of continuous analytics and successful development and implementation of response measures. Munich Re practices from one to several products in portfolios for areas exposed to the effects of future climate change (clusters of extreme temperatures and precipitation, droughts, tropical cyclones, fires, sea level changes, etc.), as well as risk forecasting for medium- (2030) and long-term (2050-2100 years) periods. It seems obvious that the alignment of Munich Re's activities with ESG principles is quite successful and advanced, while the company's aspirations do not consist solely in financing environmental activities, but are accompanied by constant and largely innovative analytical work.

The French insurance and investment group AXA progressively reduces its investments in activities that have an adverse impact on the environment, for example, coal and oil sands mining. Among the previously announced indicators of the group are a 35% reduction in carbon dioxide emissions by 2022 compared to 2019 (completed); an increase in investments in green technologies by 25.1 million euros in 2022 (by 19.8 million euros in 2023); an increase in 2022 in the share of insurance products that have a positive impact environmental impact, due to the offered guarantees or services for 1.7 million euros (in 2023, this trend continues).

Until recently, the ESG concept of AXA Group was included in its own strategic plan "The Driving Force of Progress 2023", the strategic priorities of which were countering climate change and global environmental protection, this year the company adheres to the previously adopted line, as declared in a number of relevant corporate documents.

Swiss Insurance Group Zurich (www zurich.com ) Back in 2018, she adopted her own sustainable development plan, approving the environmental "Zurich Forest Project" within its framework. It includes diverse measures aimed at protecting the environment, while containing purely insurance instruments. The practical expression of the group's activities in implementing the principles of the ESG concept financially consists in the constant growth of the investment value of projects aimed at environmental programs: in 2019, it amounted to 7.4 million US dollars, in 2020 slightly more than 8 million, in 2021 and 2022 8.2 million and last year 9.27 million dollars. USA. The Zurich Group, therefore, traditionally confirms its readiness to develop environmental initiatives (its own or third-party ones), while the group's independent analytical activity is expressed to a lesser extent.

According to its own strategic document "Forward, 2026", the reinsurance unit of the French group of companies "SCOR" (www.scor.com/en ) actively demonstrates compliance with sustainable principles within the framework of the ESG concept. The corporate slogan of the group has long been the phrase "The art and science of risk management", and environmental risks are given a very important place. Based on practice, the group's corporate principles include: taking into account environmental, social and managerial risks and factors in accordance with the ESG concept in reinsurance activities and risk management system; working on innovative solutions that help customers and partners cope with sustainable development problems; striving to reduce the negative impact of their own activities environmental impact; interaction with partners, customers and investment entities, including support for their efforts to increase sustainability. The operational guidelines and the implementation of ESG factors-concepts in group declared the following: "SCOR" contributes to the doubling of the amount of "green" and even "sustainable" bonds by the end of 2024 (compared to the end of 2020); the group joined the international "Alliance asset owners with zero emissions" and sets targets for 2025 and 2030, leading to the achievement of zero emissions by 2050; "SCOR" is committed to reducing the carbon intensity of the portfolio of corporate bonds and shares by 27% by 2025 and 55% by 2030 (compared to 2020); committed to reducing the carbon intensity of the portfolio of direct investments in real estate by 50% by 2030 (compared to 2021); developing guidelines based on the exclusion of insurance and reinsurance coverage of new coal mines, the exclusion of insurance coverage and reinsurance for projects of coal-fired power plants, phase out insurance and reinsurance coverage for coal-fired power plants without carbon capture and storage of CO2 emissions (2030 in OECD countries and by 2040 for the rest of the world); undertakes to abstain from companies receiving income from thermal coal by 2030 around the world; refuses to invest in companies that receive more than 10% of its turnover at the expense of coal or produce more than 10 million tonnes of thermal coal a year; "SCOR" does not invest in utility company, for which coal is more than 10% of their electricity generation, and other companies, the share of methane from coal seams, which accounts for more than 10% of their total production, the share of oil Sands which is more than 10% of the total production, the share of extra-heavy crude oil which accounts for more than 10% of the total production volume for which deep water is more than 20% of their total production. A separate area of environmental initiatives of the SCOR Group of companies is participation in projects for the conservation of the Arctic.

Taking into account these priority areas, the SCOR group focuses on financing measures to reduce the effects of fossil energy extraction – for example, its volumes amounted to 57 million US dollars in 2022 and 42 million US dollars in 2023.

Thus, the activities of the SCOR group within the framework of the concept of sustainable development are characterized by an optimal combination of corporate financing opportunities, their target orientation, conceptual saturation of activities and practical participation of the group in environmental programs.

Conclusion and conclusions

In the modern world, a trend has finally formed to preserve the world order for future generations, which is usually included in the framework of the concept of "sustainable development". Along with managerial and social service-oriented, it includes the direction of environmental protection, and forms the so-called ESG concept.

In the cultural space of Western Europe, they are traditionally attentive and willingly involved in the implementation of programs and activities aimed at ensuring social balance, respect for human rights, and ensuring public rights and freedoms. It is not surprising that Western European society is also an active adept in the field of sustainable development, having formed by now a certain system of loyalty and commitment to the principles of ESG. This is evidenced by numerous sources – materials from the study of public opinion, consumer demands on suppliers of works and services, people's attention to sustainable development issues, the activities of civil society activists, etc. It is not surprising that the activities of business entities in Western Europe are brought into line with the requirements of the ESG concept (these are the requirements of the market), and insurance companies are no exception in this case. It is noteworthy that the need for these efforts has not been established by law in any way and is proactive for the company. In addition, the author predicts similar processes in the Russian space in the near future and emphasizes the need for preliminary acquaintance with the future "work front".

Based on the results of the assessment of the activities of the largest Western European insurers, which largely form the global insurance market, the following conclusions and conclusions can be drawn in order to characterize both the activities of compliance with the ESG principles and the role of these insurance companies in the formation of a culture consistent with the principles.

Firstly, the ESG activity of insurers is characterized by the presence of a conceptual component. In most of the considered "sharks" of the global insurance market, corporate doctrinal documents have been issued containing the goals, objectives and forecasts of the company's accession to the Sustainable Development Goals.

Secondly, the introduction of ESG principles into the activities of Western European insurance companies is a fairly common practice and is carried out by similar methods (stimulating emission reduction, abandoning backward and dangerous industries, developing relevant insurance products, bringing their own activities in line with ESG principles, etc.), while having separate authentic features of informational, managerial or socio-economicof an economic nature, inherent in a particular company.

Thirdly, financing activities aimed at preserving the environment is a natural thing for Western European companies and is unlikely to be regarded by them as a burden on their own financial and economic activities. At the same time, compliance with ESG principles can stimulate innovation, investment inflows and new business opportunities, give impetus to the development of advanced products and services (which in turn can initiate revenue streams), and, as a result, expand business opportunities and sustainable economic growth ^[17]. Having chosen the optimal amount of financing for environmental programs for themselves and public attention, the largest insurers do not bear losses from it, but on the contrary, they act with a view to the future, while preserving and multiplying consumers of their own insurance products from among the members of society, where the insurance culture has become a stable trend.