China is currently in a critical period of green and low-carbon transformation, urgently needing to promote the green upgrading of the industrial system through means such as transforming traditional industries and developing green and environmentally friendly industries. Through basic institutional arrangements like the carbon trading market, a new pattern of deep integration between the modern industrial system and ecological environment governance should be built to promote coordinated carbon reduction, pollution control, green expansion, and growth. Achieving these goals requires the effective support of the financial market. Under the guidance and support of various policies, China’s green finance market has shown a trend of both quantity and quality growth, with green insurance also achieving considerable development.
Supporting Green and Low-Carbon Transformation
Promoting the green and low-carbon transformation of traditional industries and cultivating strategic emerging industries and industry-leading enterprises with significant green and low-carbon effects often requires substantial medium- and long-term financial support. However, green credit currently faces challenges such as an incomplete and undetailed evaluation standard system and prominent information asymmetry. The insurance industry, leveraging its environmental risk assessment system and capabilities, provides enterprises with services such as ESG (Environmental, Social, and Governance) overall risk assessment, insurance protection, and risk management throughout the entire life cycle, integrating the assessment results into the process of determining insurance premium rates. Based on the ESG performance and evaluation conclusions of lending enterprises, banks offer a series of differentiated services such as credit loans, interest rate discounts, and green approval channels. This “ESG loan + insurance” model provides self-motivation for enterprises to enhance their sustainable development capabilities, reduces their financing costs, improves financing accessibility, and has become a vivid practice of building an open, shared, and collaborative green finance ecosystem.
Necessity of Enriching the Green Insurance Product System
It is very necessary to enrich the green insurance product system. On the one hand, the industry can enhance risk protection in areas such as green and low-carbon technological innovation and green manufacturing engineering, continuously improving protection capabilities and risk reduction efforts. On the other hand, by accelerating the development of insurance types such as carbon insurance, environmental pollution liability insurance, and catastrophe insurance, the ability to proactively respond to ecological challenges can be enhanced. For instance, the “China Urban and Rural Residents’ Residential Catastrophe Insurance Community” has expanded its coverage to include natural disasters such as earthquakes, typhoons, floods, heavy rainfall, mudslides, and landslides, forming a complementary protection system between policy-based catastrophe insurance and commercial catastrophe insurance.
Due to the complexity of climate risks and limited understanding, the insurance industry has been committed to developing innovative technologies and professional capabilities, continuously exploring catastrophe models based on China’s experience, and exploring the provision of a service closed loop of “pre-disaster prevention and early warning, rapid response during disasters, and precise claims settlement after disasters” to enhance social resilience in responding to climate risk challenges.
Green Investment and ESG Performance
Green investment, characterized by stable returns and relatively long terms, aligns well with the attributes of long-term and value investment of insurance funds and is expected to become one of the important allocation areas of insurance assets. In recent years, various insurance institutions have been actively strengthening their capacity building for green investment management. They have participated in green investment through the management and operation of green insurance debt investment plans, equity investment plans, private equity funds, insurance asset management products, and investment in green bonds, with the intensity and scale gradually increasing.
Research has found that good ESG performance can help enterprises avoid risks, build trust during crises to withstand shocks, and significantly enhance enterprise performance and long-term value. Green finance is a long-term strategic choice with clear economic logic and measurable value. However, from a practical perspective, the short-term financial returns of green finance are not significant. Many business entities lack a basic understanding of ESG, and there is no unified standard for ESG information disclosure. The consistency of results from different evaluation systems is relatively low. In reality, there is even the phenomenon of “greenwashing,” which is not conducive to the in-depth development of green insurance. To further enhance the quality and efficiency of green insurance in supporting the real economy, efforts need to be made in multiple directions.
Institutional Construction
Further refine the green connotation of the green industry, deepen the understanding of green projects, accelerate the improvement of important standards such as the content and frequency of ESG information disclosure, and establish an information sharing mechanism among industries to ensure the accuracy and timeliness of information acquisition, facilitating the innovation of green insurance products, services, and business models.
Capacity Building
The insurance industry should continuously enhance its innovation capabilities based on technology and data, improve professional technical levels such as environmental risk assessment, scenario simulation, and stress testing, strengthen the early warning service capabilities for disaster prevention and loss reduction, promptly identify potential risks and hazards, and effectively play the role of risk reduction. At the same time, more green standards and ESG investment concepts should be incorporated into the existing investment processes, asset strategic allocation plans, and investment programs. The green investment research system and the green product creation mechanism should be improved to enhance green investment capabilities.
Product and Service Innovation
Explore business models such as “insurance + loans” and “insurance + carbon quotas” to provide internal impetus for the green transformation of individual micro enterprises.
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