Insurance power: ESG versus energy access in Africa
“The topic of environmental, social, and corporate governance (ESG) issues and African energy is always a slightly contentious one, because only 40 percent of the population have access to electricity. Half of that electricity comes from coal-fired power plants, so turning those off would be a disaster on a social basis.”
This was the view of Mikir Shah (pictured), chief executive officer of pan-Africa-focused reinsurance group Africa Specialty Risks (ASR), as he discussed the African insurance market with Intelligent Insurer.
Figures from the International Energy Agency for 2022 show that six hundred million people in Africa lack access to electricity. But the continent’s move to cleaner energy is necessary and already well underway.
Shah argues that the way this change is supported will be vital for protecting existing access to electricity. For example, turning off coal power without an alternative source ready to go would penalise underserved populations that rely on coal power. The ‘S’ of ESG is in conflict with the ‘E’, he says.
However, re/insurers have a vital role to play in resolving this conflict, he says.
“We know Africa is transitioning probably at a faster rate to renewable energy than anywhere else in the world. As the countries fulfil the energy needs of their populations they are focusing on that coming from renewable energy.”
Re/insurers can support and accelerate this further by de-risking investment in renewable energy, says Shah, which in turn will encourage more investors into the market. He says that this is a big area of focus for ASR.
Some countries are way out in front in the move to renewables. In Zambia, hydropower is the dominant energy source, providing 80.8 percent of the country’s electricity supply in 2019, with an additional 3 percent from solar power, according to the International Labor Organization. And in Kenya, renewable energy sources generated more than 80 percent of the country’s electricity in January 2023, says the Kleinman Center for Energy Policy.
