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By Balewa Zyuulu
The global conversation on Environmental, Social, and Governance (ESG) practices has gained impetus. This has compelled industries to align their operations with sustainability and inclusivity. The Zambian insurance industry is no exception, as the integration of ESG principles offers an exclusive opportunity to drive long-term value, ensure responsible practices, and contribute to the country’s sustainable development goals.
However, despite its importance, ESG considerations in Zambia’s insurance sector remain underdeveloped. This has necessitated immediate attention and action. Therefore, in this week’s “Business Focus,” we will concentrate on explaining in simpler terms how Zambian insurance companies can tackle the gaps in ESG considerations to sustain growth of the industry.
What is ESG?
The term ESG originated in the 2004 United Nations Global Compact report, Who Cares Wins: Connecting Financial Markets to a Changing World. This report underlined the integration of ESG factors into corporate decision-making and investment strategies to create long-term value while addressing risks and opportunities associated with environmental, social, and governance issues.
According to the International Finance Corporation (IFC), ESG factors include:
• Environmental: Changes to the physical or natural environment, including climate risks and pollution.
• Social: Impacts on communities and workers, such as human rights, inequality, and inclusivity.
• Governance: Corporate structures, policies, and accountability mechanisms.
Why Does ESG Matters?
ESG matters because it creates long-term value, optimizes risk management, and aligns corporate objectives with stakeholder priorities.
The Case for Microinsurance in ESG Integration in Zambia
Microinsurance is a tool for promoting ESG principles, particularly in underserved areas like rural areas like Gwembe in rural Zambia. By offering affordable and tailored insurance products, microinsurance empowers vulnerable populations, strengthens community resilience, and promotes sustainable practices.
According to Industry players like Israel Muchena an executive at Hollard Group, microinsurance provides a unique opportunity to link financial performance with social and environmental impact. He notes that “strategic shifts and win-win partnerships are critical to achieving fundamental changes that benefit both companies and society.”
The Hollard Group has been at the forefront of leveraging microinsurance to address ESG challenges. Below are four practical case studies:
1. Hollard Agri-Tech Prototype
Targeting agricultural offtakers supporting 150,000 smallholder farmers, this initiative addresses critical ESG issues such as food security, land degradation, and climate shocks.
Solutions: Farmers are introduced to crop rotation practices with embedded insurance for food crops, enhancing soil fertility and productivity.
Benefits: Increased food production, improved environmental impact, and strengthened climate resilience.
2. Agricultural Offtaker Scheme
This scheme supports farmers by embedding insurance into value chains, addressing ESG challenges such as deforestation and overreliance on single cash crops. The initiative promotes sustainable practices, protects livelihoods, and fosters long-term environmental stewardship.
3. Rural Resilience Initiative (R4) of the World Food Programme (WFP)
Combining conservation agriculture, savings, and livelihood diversification, this initiative empowers rural households to build resilience against climate risks. Microinsurance ensures that farmers are protected from extreme weather events, allowing them to recover quickly and maintain food security.
4. Building Resilience Index of the IFC
This index focuses on creating resilient buildings to mitigate the impacts of climate change. Every dollar invested in resilient infrastructure generates four dollars in savings, highlighting the economic and environmental benefits of ESG-aligned investments.
Despite the benefits of ESG, progress in Zambia’s insurance industry has been slow, with many companies treating ESG as a Corporate Social Responsibility (CSR) activity rather than a strategic imperative.
In the words of Muchena full ESG integration requires the following steps.
Microinsurance offers a practical avenue to bridge ESG gaps in Zambia’s insurance sector. By leveraging partnerships, innovative products, and technology, insurers can address systemic risks while empowering communities. Moreover, incorporating ESG into core operations will enhance transparency, attract investors, and build trust among stakeholders.
As Israel Muchena states, “The integration of ESG factors in insurance is not only about managing risks but also about unlocking opportunities to create a more sustainable and inclusive future.”
Insurance companies are not merely financial intermediaries; they are essential actors in economic resilience and development. ESG factors influence risk management, investment strategies, and product development.
Gaps in ESG Practices in Zambia’s Insurance Industry
Despite its potential, the adoption of ESG principles in Zambia’s insurance industry is hampered by several gaps:
Limited Awareness and Expertise
Many insurers lack a comprehensive understanding of ESG principles and their implications. This gap limits the ability of companies to develop innovative, sustainable products.
Inadequate Regulatory Framework
While Zambia has made strides in financial regulation, ESG-specific policies for the insurance sector are either non-existent or underdeveloped. Clear guidelines are crucial for driving sector-wide adoption.
Absence of Climate Risk Strategies
Climate-related risks remain inadequately addressed in risk assessment and product design. This oversight leaves the industry vulnerable to potential losses and limits its ability to mitigate climate-related impacts.
Insufficient Social Inclusion
Rural communities and low-income populations often lack access to insurance products. Tailored microinsurance solutions could enhance financial inclusion and resilience among these groups.
Weak Governance Structures
Issues such as lack of transparency, inadequate stakeholder engagement, and insufficient reporting on ESG metrics persist in the sector.
What the Strategies for addressing ESG Gaps?
Capacity Building and Awareness
Industry stakeholders, including regulators and insurers, need training on ESG principles and their practical applications. Workshops, partnerships with global ESG experts, and access to relevant resources can bridge this knowledge gap.
Policy and Regulatory Development
Policymakers must establish clear ESG guidelines tailored to Zambia’s insurance sector. Collaboration between the Pensions and Insurance Authority (PIA), financial institutions, and international bodies is critical to formulating effective policies.
Climate Risk Integration
Insurers should incorporate climate risk into underwriting, pricing, and investment decisions. Developing climate-specific insurance products, such as crop insurance, can help farmers mitigate losses from extreme weather events.
Promoting Financial Inclusion
The industry must focus on creating accessible and affordable insurance products for underserved populations. Leveraging digital platforms can improve outreach and reduce costs.
Strengthening Governance and Transparency
Insurers must adopt robust governance practices, including regular ESG reporting, stakeholder engagement, and adherence to international standards such as the Principles for Sustainable Insurance (PSI).
Partnerships and Collaboration
Collaborative efforts among insurers, regulators, civil society organizations, and development partners can foster innovation and accelerate ESG adoption.
Therefore, advocating for ESG integration requires a multi-stakeholder approach. Insurers must champion ESG initiatives by demonstrating their value to shareholders, clients, and society at large. Consumer education is equally vital to creating demand for sustainable products.
As Zambia works towards building a resilient and inclusive economy, the insurance sector must rise to the challenge of embedding ESG considerations into its core operations. Doing so will not only address existing gaps but also position the industry as a leader in sustainable development.
Through prioritizing ESG, Zambia’s insurance sector can transform from a passive financial service provider to an active enabler of resilience, equity, and sustainability.
The integration of Environmental, Social, and Governance (ESG) principles in Zambia’s insurance industry is no longer a choice but a necessity. With climate change, social inequalities, and governance issues posing significant risks to businesses and communities, the insurance sector must adopt sustainable practices. Microinsurance, in particular, offers an effective way to address ESG challenges while ensuring inclusivity and resilience.
The time for Zambia’s insurance industry to embrace ESG is now. With microinsurance leading the way, the sector can play a pivotal role in addressing environmental, social, and governance challenges while driving long-term growth and resilience.
The author is a multiple award-winning Journalist and Economist.
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