How Insurance Can Support the Sustainable Development Goals
The Sustainable Development Goals are a series of 17 goals created by the United Nations in 2016. The aim of achieving these goals is to bring peace, prosperity, and a healthy planet in the near future.
The goals range from eradicating issues such as poverty, hunger, and a lack of clean water to achieving quality education, affordable and clean energy, and economic growth for all people and in all nations. Other goals include supporting innovation, industry, and infrastructure; reducing income inequality; and building sustainable cities and communities.
Insurance, when made widely available to everyone, can play an important role in achieving the Sustainable Development Goals. As a risk protection mechanism, it can enable individuals to make ambitious choices such as buying a home, starting a business, or investing in an electric vehicle—all actions that contribute to their community and work towards building a better future.
Combating Poverty
When it’s implemented correctly, people trust insurance to understand, manage, and carry the burden of their risk. Financial shocks like property damage, accidents, and hospitalizations deplete individuals’ savings and push people into poverty. When people trust in insurance, they can more easily recover from such shocks. This leads to a world of greater financial stability and increased economic activity.
We’ve already seen how insurance works, on a nationwide scale, as a safety net. During the COVID-19 pandemic, the World Bank estimated that 119 to 124 million people became newly poor. This financial shock was lessened, however, in countries with strong insurance. Financially burdensome events like hospital visits were relieved by health insurance, for example.
By providing a safety net and helping businesses manage risk, insurance companies can also support better working conditions, which contributes to the Sustainable Development Goals. Insurance also has the potential to help provide opportunities for specific individuals, including those from marginalized communities, due to its ability to be custom and personalized.
Promoting Environmentally-Friendly Investments
When people aren’t as worried about holding onto their money in case of emergencies, they will more readily invest in things like a new home, a new car, or starting a business. They may even have the funds to live a more environmentally-friendly lifestyle, investing in technologies like solar panels or electric vehicles—or for businesses, more sustainable manufacturing, shipping, or agricultural practices.
As we continue to witness more and more of the effects of climate change, individuals and businesses will increasingly seek to mitigate risk related to natural disasters like wildfires, drought, and floods. Insurance will continue to play a role in the risk management of individuals and small businesses and can also help governments mitigate climate-related stress in terms of agriculture, disaster relief, and damage to infrastructure.
Investing and Advising
The insurance sector is one of the largest investors in the world, which gives it the power to support sustainable economic development. As investors, insurance companies can give back to their communities and support their resilience in the face of economic uncertainty.
Insurance companies also have the power to advise governments and other key stakeholders. They can provide advice on risk management and also push governments and stakeholders towards sustainable economic development.
One example of the insurance industry influencing policy decisions is how auto insurance has been made mandatory in nearly every US state, which creates a nationwide safety net for all drivers, who can rest assured that if they get into an accident with another driver, they won’t face such a heavy financial burden.
Principles for Sustainable Insurance
In 2012, the UN Conference on Sustainable Development published a list of guiding principles for the insurance industry to support sustainable economic growth. The Principles for Sustainable Insurance (PSI), applicable around the world, have guided the Net-Zero Insurance Alliance (NZIA)—a global partnership of insurance companies aiming to reach net-zero carbon emissions.
The four PSI principles ask insurance companies to:
- Account for environmental, social, and governance (ESG) issues in their decision-making
- Work with clients and business partners to raise awareness of ESG issues; manage risk; and develop solutions to these issues
- Work with governments, regulators, and key stakeholders to advocate for action on ESG issues
- Show accountability and transparency through regularly disclosing their progress in following these principles
When following these principles, insurers can become more environmentally-friendly, support their local communities, and work towards the achievement of the Sustainable Development goals.
Learn more about what the future of the insurance industry looks like and our insights on how inflation will impact insurance in 2024.
