How should insurers adapt risk management frameworks to integrate sustainability?

When you have built the models that help shape risk management strategies and guide investment decisions on the firm foundations of high-quality historical data, embracing sustainability as a key theme in portfolio construction sometimes seems like stepping into an uncertain world.

The very nature of the myriad issues wrapped up in sustainability means that decades of performance data and trends that drive traditional risk management models are simply not available. Sustainability is about new risks, with climate change looming as, by far, the largest, but not the only factor that needs to be integrated into a coherent strategy, closely aligned with a company's values and core purpose.

This is relevant to insurers because risks around these areas are constantly expanding and taking on new dimensions – particularly non-market risks.

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