Insurance companies often face sustainability and financial risk exposures, and these two risk factors have become issues of concern within the insurance ecosystem. Sustainability-related risk factors, including climate change, environmental degradation, social inequality, policy, and technological shifts have direct and indirect financial risks for insurance companies. The emerging risks from these factors have impacted insurance investments. It is therefore imperative for insurance companies to attain sustainability by incorporating environmental, social and governance (ESG) issues into their underwriting, investment, risk management, and capital adequacy decisions. This chapter examines climate change and the insurance industry, the linkage between sustainability and financial risk as well as sustainability and the insurance industry, emphasising on underwriting related and investment related issues. The chapter also discusses the principles of sustainable insurance, and the role of investment of insurance funds in a sustainability era.
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