Lloyd’s of London, a renowned insurance marketplace with historical significance, faces scrutiny over its environmental and social responsibility practices as highlighted by a recent evaluation conducted by the British investment activism group ShareAction.
ShareAction’s assessment revealed a lackluster performance by Lloyd’s in the realms of environmental sustainability and societal responsibility. The group emphasized the necessity for the British financial sector, including institutions like Lloyd’s, to prioritize comprehensive protection for both society and the environment.
In its review of major insurers in the nation, ShareAction assessed Lloyd’s and found shortcomings in its adherence to voluntary Environmental, Social, and Governance (ESG) guidelines. Despite Lloyd’s having voluntary ESG guidance for its managing agents, ShareAction’s evaluation rated adherence to these guidelines poorly, with a low score of 13/100 and an “extremely poor” grade of “E.” ShareAction noted that Lloyd’s voluntary guidance, established three years ago, recommends participation in an ESG alliance from which Lloyd’s has since withdrawn.
One notable concern raised by ShareAction is Lloyd’s lack of restrictions on underwriting ventures in thermal coal or offshore oil and gas, industries known for their carbon-intensive nature. ShareAction advocates for a commitment from Lloyd’s to phase out support for these environmentally detrimental sectors.
However, ShareAction asserts that the primary responsibility for improving ESG performance lies with Lloyd’s managing agents, who oversee individual syndicate operations. Alarmingly, nearly half of Lloyd’s managing agents received an “extremely poor” grade of “F” in ShareAction’s assessment, primarily due to their failure to establish net-zero targets or transition plans. ShareAction underscores the necessity for Lloyd’s to mandate specific ESG requirements for its agents if improvements are to be realized.
Moreover, ShareAction’s evaluation highlighted a broader issue within the insurance industry: the minimal linkage between ESG factors and management compensation. This disconnect raises concerns that climate targets may not receive adequate attention in day-to-day operations, with senior staff primarily incentivized by other Key Performance Indicators (KPIs) such as Profit and Loss (P&L).
In conclusion, ShareAction’s assessment underscores the imperative for Lloyd’s of London to enhance its ESG performance and align with evolving societal and environmental expectations. Failure to do so could potentially prompt regulatory intervention, given Lloyd’s historical relationship with the British state.
