The Bermuda Stock Exchange (BSX) has introduced an environmental, social and governance (ESG) initiative to promote sustainable and responsible growth for its member companies and listings, with insurance-linked securities (ILS) recognised as a sustainable development investment.
Considering Bermuda’s leading position in the ILS sector, the BSX suggested it will play an increasingly important role in assisting communities around the world adapt to and recover from natural disasters, a changing climate and the resulting impact on vulnerable communities.
BSX added that many of its listings - in particular for the ILS sector - are developing products that it suggests will move the sustainable finance agenda forward.
ESG criteria are standards for a company’s operations that investors use to screen potential investments, BSX explained. Environmental criteria consider how a company’s operations impact the natural environment and climate. Social criteria examine how a company manages relationships with employees, suppliers, customers and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls and shareholder rights.
“Stock exchanges are at the intersection between capital market players and their increasing responsibility to ensure business practices are geared toward positive environmental, social and governance practices,” said Greg Wojciechowski, CEO of the BSX. “At the BSX we are moving forward in encouraging and empowering social impact investing and compliance with best market practices and driving sustainable finance as ESG standards become increasingly important and formalised.”
The BSX suggested investors who are looking to grow their holdings in asset classes linked to social and responsible investments creates an increased pool of investors in ILS, which are helping to narrow the protection gap of uninsured and underinsured risks.
There are 950 securities listed on the BSX, and ILS comprises 330 listed issuers with $42.7 billion in market capital outstanding.
The United Nations’ Sustainable Development Goals (SDGs) have also recognised ILS as being a sustainable development investment by helping to build resilience to disasters and climate change.
“The emerging trend for entrepreneurs, investors and business people is to incorporate ESG initiatives when investing and doing business. This trend will only become more important in the future. What is clear is that companies can no longer simply seek to make a profit and return for shareholders. Success will also be measured by the extent to which companies embrace ESG initiatives,” added Wojciechowski.
“As climate change, social awareness and transparent governance become more important, at the BSX, we see this as an opportunity to help our member companies move forward with an ESG agenda that will assist communities around the world adapt to a changing world in terms of environmental change, social issues and more transparent governance.”
BSX, ILS, Bermuda