“Insurers must start using ESG lens to enhance and in most cases revamp how they conduct their business.
On the “”E””, insurers must evaluate their current business and operating models, in order to reduce their carbon footprint, including across the value chain, upstream and downstream. Insurers need to set ambitious and measurable goals to manage Scope 1, 2 and 3 emissions and set a plan on how to reach net zero with concrete milestones and timetable. Setting science-based targets to align with the Paris Agreement goals is needed and will be challenging. Solutions might include implementing carbon reduction strategies, such as switching to renewable energy sources, improving energy efficiency, reducing waste and water consumption, offsetting emissions through carbon credits or nature-based solutions, and promoting green mobility and travel. They also need to start preparing now to implement measurement and disclosure procedures of their carbon footprint as this will be mandatory as early as 2025.
On the “”S””, better workforce management might be required. Diversity, gender equity and inclusion remain a challenge for insurers, so action towards a fairer and more equitable workplace for employees is needed. Fostering a culture of inclusion, respect and belonging, where employees can bring their whole selves to work is crucial. Insurers will provide learning and development opportunities, flexible work arrangements, wellness programs and recognition schemes to attract, retain and motivate their talent. For example, some insurers have launched diversity and inclusion initiatives, such as mentoring programs, employee resource groups, unconscious bias training, pay equity audits or diversity hiring targets. Some insurers have also implemented employee wellbeing programs, such as mental health support, fitness challenges, virtual social events or financial education.
On the “”G””, building strong governance frameworks is necessary. Corporate governance best practices must be in place. Collegial decisions are core as it is critical to have a strong and effective oversight and constant challenge of the ExCo. Insurers will need to introduce mechanisms to measure and review progress on the ESG objectives. Standards and guidelines should be aligned with the vision, mission, values, and ultimately the strategy being executed. Products, underwriting, pricing, and asset management necessarily should be entailed and overhauled. For example, some insurers have established ESG committees that oversee the development and implementation of ESG policies, strategies and targets. Some insurers have already integrated ESG criteria into their product design, underwriting process, pricing models and asset allocation decisions.
Henceforth, in a nutshell, ESG must be part of the enterprise risk management to be fully embedded in the corporate culture as soon as possible to make it real and not theoretical. All starts by setting an ambition, doing an as-is assessment, and setting a roadmap to reach the targets. To do this effectively, insurers need to engage with their stakeholders, such as shareholders, regulators, customers, employees, and wider communities, to understand their expectations and preferences on ESG issues. They also need to leverage technology, data and analytics to augment their ESG capabilities and performance. They also need to monitor the emerging trends and best practices on ESG topics and adapt accordingly. Now more than ever insurers need to follow the wise words of Mahatma Gandhi: “”Be the change that you wish to see in the world!”.”