Face to Face: Charles Anderson Mitigating risk – embracing sustainability

There’s photo sitting on the shelf behind Charles Anderson’s desk – it’s of him, fly-fishing in the pristine beauty of Lake Wakatipu.
The photo highlights not just his hobbies – but his values. This, says Sovereign’s CEO is what it’s all about; this is what we risk losing if we can’t start thinking and acting for the long term. Already many of New Zealand’s waterways are no longer safe to swim in. It’s taken just one generation for human impact to erode their quality. And that impact is both exponential in pace and global in spread.
“We now have this thing called didymo clogging our rivers; significant parts of the southeast of America’s Southern states are covered with this horrible invasive ivy. There are whole lot of complex and inter-connected impacts going on and business is one – business is impacting on the environment constantly. I think it’s important we understand where we fit in the ecosystem and try to work out how we can have positive impact – certainly avoid having negative one. There are lots of models emerging in biosciences that tell you it’s possible.”
Anderson speaks with persuasive intensity, his passion palpable and his message clear.
“We can’t carry on doing what we’re doing. I’m not alone in saying ‘business as usual’ is not an option. There’s lot of heavyweight thinking going on around the world about why and how we need to reverse the exponential rate of environmental degradation.
“I think business will have to take lead and I think it can. People are already creating some great new businesses out there dealing with lot of practical solutions, implementing the science needed to build business models that can deal with some of the problems we face. But even established companies are changing their business models.
“BMW sees the future is in electric vehicles. Nissan has invested billions in the technology knowhow to make electric cars at price everyone can afford. In California they already have infrastructure along motorways for re-charging electric vehicles… It’s all happening. The green economy is not myth.”
And while there is lot of exciting stuff at the pioneering interface, Anderson notes that we don’t actually have to invent whole lot of new stuff in order to create change.
“Right now, we have enough science, enough technology to solve the problems we are facing…”
What’s needed is greater traction.
Anderson has stuck his colours clearly to the mast – he is not only driving his own company’s shift to more sustainable operations but also putting energy behind range of broader-based initiatives both in his own industry and in the wider community.
He attended last year’s Rio Summit, can quote verbatim some of the “sad facts” around lack of progress – even backsliding – on nearly every measure of global environmental health. But, he says, there are bright spots – halting destruction of the ozone layer proves what can be done when there is concerted effort. And while intergovernmental agreement on action is moving slower than the steadily melting ice floes, he thinks business can and is taking lead.
“The difference for me after attending range of sessions was that while governments have an enormously difficult problem working out what they can agree on, what they can do – business was saying we can do this. These are things we can do and things we can commit to. I found that enormously energising.”
Just few examples: the CEOs of major global companies getting together to thrash out mandate on achieving more sustainable use of water; others (including Anderson) engaging with Natural Capital Accounting initiative aimed at factoring the value of natural assets such as water, air or forests into economic accounting.
While the idea of putting an economic value on ecosystem services is anathema to some, Anderson is pragmatic. “The reality is that if everyone treats these things as global commons – if no measure of pricing is factored in, then they will go on being used until nothing is left…”
Some global stock exchanges are now encouraging listed companies to apply environmental and social measures to governance practices; bunch of big brand companies have agreed to apply environmental profit and loss measures right through their supply chains and chart progress on these. And global insurers are also taking lead, says Anderson.
Sovereign became the first NZ signatory to the United Nations’ Principles of Sustainable Insurance – an initiative designed to make sustainability fundamental concern for the industry. As Anderson points out, it’s an industry with innate understanding of risk management – the mitigation and pricing of risk.
“Some of the big insurers have done great modelling work on the impacts of climate change that is getting fed into government policies. For instance, there’s some joint work happening on flood protection. If you want to insure properties built on flood plains, then we need some proper joined-up thinking about what you are doing as local authority to prevent flooding.
“It’s been known for many years that the best form of coastal flooding prevention is rebuilding mangrove swamps, re-planting wetlands – there are some very practical things you can do to mitigate risk.”
All that said, progress on environmental initiatives aimed at mitigating climate change impact continues to move at glacial pace and in tight economic times is not exactly heading corporate agendas. So – how to get the message across and get the traction you need at the speed now needed to achieve change?
You just have to start where you can and create incremental impetus, suggests Anderson.
“You start it by building awareness in the world you live in and the impacts we can have on it – amongst your executive team, your staff. So you start to understand the implications of what you are doing and then present opportunities on the upside.”
Looking to the long term, the reality is that deterioration in environmental eco-systems and society in general is certainly not good for the health and insurance sector – or any business.
“The bottom line on this is that you can’t run or grow good business in failing society: no-one can. So at that macro long-term level, you have to understand that sustaining an acceptable quality of life is what every business needs because they need customers around to buy things.
“That’s the long term. The challenge is in bridging the gap between short and long-term and doing range of things. So you need to attend to short-term issues where you can, identify where medium and long-term opportunities are, and have plan to get there. Above all, you have to figure what is relevant and material to your business.”
He believes it is vital that everyone does what they can in whatever sphere of influence they have.
“My starting point for Sovereign is what is relevant for us and essentially that is through the investments we make for our policy holders. We invest about $2 billion and, for us, that is the biggest impact we have in this world. So it’s about screening out financial investments that are net negative (environmentally) and screening in those that are net positive.
“Our aspiration over time is for you as policy holder to get online and find out what are the total environmental and social impacts of our investment portfolio…”
At enterprise level, Sovereign is incrementally greening its own operations. Its Auckland office is in green star-rated building and the company is steadily reducing its energy and resource use, boosting recycling and investing in cleaner car fleet.
“We bought the first Nissan Leaf electric car in our carpool, reduced our energy bill by about $80,000 year and our paper cost by about $1.5 million over the past four to five years.”
The company recycles or composts more than 80 percent of the waste it generates and offsets 100 percent of its greenhouse gas emissions.
Community programmes are second string of its sustainability agenda and the company partners with