TCFD benchmarking: where do insurers go from here?

We used publicly available reports (from 2018 to 2019) for each company¹, applying a Red, Amber, Green (RAG) scoring methodology as follows:

• Green: Meets requirements
• Amber: Partially meets requirements
• Red: Does not meet requirements

Companies achieved one point for a green score for any one of the eleven TCFD recommendations in the four categories (see below ‘The march of TCFD’). Figure 1 shows total scores for each company.

Figure 1. Green RAG scores against the 11 recommended TCFD disclosures

Key takeaways

• First, although a lot of progress has been made in recent years, and many companies are now disclosing a reasonable amount of climate-related information, most companies, including those who scored highest in our analysis, acknowledge they need to make further progress. We believe that further work is required in areas such as climate scenario testing, consistent use of metrics and target setting.

Figure 2. Major themes RAG summary (all companies)

• Secondly, as Figure 2 shows, the scoring across the four major themes was varied and only four companies achieved the highest score in at least three of them. The strongest area was governance, with the highest proportion of top scorers in comparison to the other three themes. As the following table shows, board oversight is the area in which companies show the best performance overall. On the other hand, only seven companies achieved a green rating for scenario analysis.

• The analysis highlights the variation in scoring by company type. Independent asset management companies scored the worst in all areas, with the most red scores overall as well as in each of the four main themes. The mean total score of independent asset management companies is four whilst the figure for insurance and asset management groups is nine. The (re)insurance mean score is five but with more variation.

As well as investigating their overall performance, we also explored the possibility of correlation between companies’ scores and other factors. Specifically, we investigated whether there is correlation between score and market capitalisation, and if there is a correlation between the length of TCFD report and score. On both counts we found no clear correlation.

What next?

Although some companies in the insurance sector are performing better than others, in all but one case there is room for improvement across the board. This is not to detract from progress already made across the industry and by regulators - but there is still considerable room for fuller and more transparent disclosures.

Footnote

¹Aviva plc, Standard Life Aberdeen, Phoenix Group, Legal and General, Lloyds Banking Group, Prudential, AXA Group, Swiss RE, Aegon Group, Allianz, Storebrand ASA, Generali, NNGROUP, SCOR, M&G, LGIM, Wellington, Amundi, Schroders, JPMorgan and Aegon

Author

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Dhiran Dookhi

Director, Insurance Investment Team

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Nambassa Nakatudde

Lead Associate, Insurance Investment Team

Email

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