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Industry must ‘step up’ to be really attractive for ESG investors: Rivaldi, Twelve Capital


If the global risk transfer industry ramps up its efforts around transparency, it would become a far more attractive space for the growing pool of environmental, social and governance (ESG) focused investors, says Marcus Rivaldi, Managing Director of Analytics at Twelve Capital.

Marcus Rivaldi, Twelve Capital, ILW NYC 2021The universe of investors seeking responsible and sustainable investments is accelerating at a rapid pace across the financial sector, and the risk transfer industry is no exception.

As a result, the prevalence of ESG funds is projected to grow significantly over the coming years. And, given the insurance, reinsurance and insurance-linked securities (ILS) sectors’ role in protecting society against the world’s perils, ESG has fast been identified as a growth opportunity.

In light of the segment’s expansion, Artemis’ fifth ILS NYC conference, held virtually last month, featured a discussion with Twelve Capital’s Rivaldi around the future of ESG in ILS.

According to Rivaldi, ESG investing is expected to become an even more significant component of markets going forward, and it’s natural that ESG investors will be looking for new avenues and opportunities to deploy their capital.

For reinsurers, said Rivaldi, the big win with ESG is greater financial flexibility. While for ILS, he continued, the big opportunity is growth.

But in order to secure both interest and support from the ESG investor community in a meaningful way, the industry needs to make greater strides around transparency, explained Rivaldi.

“So, incoming EU rules provide for different shades of green, shall we say, within funds. Shall we say the lighter shade of green is where you absolutely think about traditional financial metrics, but also would fit trying to promote a certain E, S, or G factor within your investment approach.

“And, I think, certainly for us here at Twelve, that is how we’re looking to position our cat bond fund,” he said.

Rivaldi went on to explain that the higher standard, which is called Article 9 funds, effectively places sustainability as the prime investment goal behind any investment approach.

“And, I think, given the disclosure / transparency issues that, perhaps at the moment, is a step too far.

“But, if the industry steps up, if we start getting this transparency disclosure of a quality that we really need, and it genuinely is this asymmetry between demand and knowledge of  information from investors and what the industry is prepared to give, then, who knows. We can then start moving to that Article 9 territory, and that would really be very attractive for ESG investors,” said Rivaldi.

The session, which was broadcast first to event registrants on Tuesday 9th Feb, can now be viewed below:

Every session from ILS NYC is now available  via our Artemis Live video channel and audio versions via our podcast as well.

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