INTRO
Corporations increasingly include non-financial factors, such as environmental and social impacts of operations and investment practices, into business analyses to help them identify risks and growth opportunities.
Generally referred to as environmental, social, and governance (ESG), these factors have become more significant due to:
- Globalization,
- Concerns about climate and extreme weather, and
- Social media making inequity and injustice more visible in real time.
Ideal partners
While ESG priorities may seem new to many industries, insurers have long been involved in understanding and addressing these and other risk factors as a fundamental part of doing business:
- Assessing risk accurately and pricing coverage affordably are disciplines through which the industry supports wealth creation through informed risk sharing;
- Timely claims payments help families, communities, and businesses bounce back from costly accidents and disaster;
- Regulated by all 50 states and the federal, insurers must maintain reserves to protect policyholders – insurance is arguably the most heavily scrutinized industry in the world.
As a result, they are well prepared to meet ESG-related demands and are ideal partners for businesses, communities, and nonprofits seeking to navigate this “new” area of risk and opportunity.
Although typically discussed in terms of three distinct “buckets,” ESG priorities overlap significantly, as illustrated below. As the COVID-19 pandemic has shown, hazards that affect “everyone” tend to have a disproportionate impact on vulnerable populations – particularly communities of color. This is particularly evident in the case of natural catastrophes, but it also is relevant when speaking about product access and affordability, hiring and promotion, and composition of boards of directors. Climate/weather issues often straddle social concerns, and governance needs to take both into account.
And, far from being an impediment to profitably performance, research increasingly demonstrates an ROI advantage for companies that include ESG into their business strategy.
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Below are links to the ESG protocols and priorities of rating agencies and other influential entities to help insurers and other companies think about the ESG landscape. Also listed are the ESG and corporate and social responsibility (CSR) areas of some of our member-company websites.
Also, see the Triple-I Resilience Accelerator for data-driven insights around resilience.
