BSX prioritises socially aware investing
Increased prominence has been given to the environmental and socially responsible side of a multibillion-dollar investment asset class in which Bermuda is a market leader.
A discussion about insurance-linked securities has highlighted the growing acceptance that they are part of ESG investing — environmental, social and governance — that socially conscious investors use to screen potential investments.
The global ILS market has grown to about $100 billion, with catastrophe bonds making up about $41 billion of the total.
The Bermuda Stock Exchange has about $38 billion of the bonds listed.
Greg Wojciechowski, the president and chief executive of the BSX, said: “Our jurisdiction has become the centre of excellence for the creation and support of ILS securities.”
He was speaking at an Alternative Investment Management Association Bermuda webinar, organised by the Bermuda Business Development Agency.
He said the World Federation of Exchanges, of which the BSX is a member, has made ESG one of its priorities.
Mr Wojciechowski, who is on the board of the federation, said: “The BSX feels strongly about ESG and providing a platform for ESG investment.
“Last year, several European pension funds deemed ILS securities to be ESG compliant because of some of their attributes in terms of community reconstruction, and some of the things they do getting companies and communities back up to speed after catastrophes.”
Mr Wojciechowski added: “That really was a huge shift in how the market looks at ILS securities and opens the asset class to a whole new demographic of investor, who might be a socially aware and a socially conscious investor.
“There are dedicated funds that target those types of securities. That was a big development.”
He said ILS provided capital for insurance coverage in places that are typically not well covered.
Mr Wojciechowski added: “We talk a lot about the protection gap, the underinsured, whether industries or geographies.
“ILS helps provide more resources into the solutions to narrow the protection gap. The BSX found this a massively exciting development for the asset class.”
Ariane West, the director of structured finance, at Nephila Climate, who also took part in the webinar, said ILS and insurance and reinsurance could contribute towards the United Nation’s sustainability goals, and “could be quite pivotal, not only in climate action”.
She added: “Sustainable energy, sustainable communities and cities, industry innovation and infrastructure development, even the elimination of poverty — ILS and reinsurance plays an important role in supporting sustainability and resilience among communities and cities which feeds into all of those goals.”
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