Put ESG at the heart of insurers’ business

07-12-2022

Whether through the recent United Nations Framework Convention on Climate Change (COP27) or protest initiatives such as Just Stop Oil, conversation around organizations’ environmental, social and governance (ESG) efforts is hot. There are no two ways about it, insurers have to be at the forefront of this conversation. 

With a wealth of data at their fingertips and decades, if not centuries of experience in tracking and understanding change and risk across the environment and society, they are better placed than most to understand the challenges and effect change. In climate terms, we are already seeing initiatives to prevent wildfire and flood damage, while in the social sphere, there can be no doubt that insurance is at the heart of transforming the US healthcare system through preventative and holistic measures. 

In the upcoming webinar, Leverage ESG for Better Business Outcomes, Dr Tendü Yogurtçu, chief technology officer at Precisely, will join a panel to discuss how insurers can manage and measure the enormously complex spectrum of ESG activities to benefit both business, and society as a whole. Yogurtçu will be joined by Laura Wanlass, partner and global corporate governance & ESG consulting practice leader, Aon; Craig Hupper, SVP and managing director, head of sustainability and resilience, TransRe; Shelly Habecker, VP, life & health sustainability lead Americas, Swiss Re; and Karen Jarmoc, director, sustainability, Allstate. Precisely’s Michael Shelton moderates. 

Intelligent Insurer took some time to speak to Yogurtçu ahead of the webinar to understand just how insurers can implement ESG measures effectively, particularly when the results may be very long-term and are often viewed in more altruistic, rather than business-critical terms.

Q: Why is it vital that insurers pay attention to ESG, and why now? 

A: Insurance, at its core, has always been about managing risk. The principles linked to ESG criteria, even before mandates were in place, have always been critical to carriers. They have always focused on understanding the impact of extreme weather, climate change, floods and wildfires—and how these will impact their balance sheets. 

What’s different today is that other than regulators, investors and standard setters, it’s the insurance companies’ employees, partners, agents and customers who are asking questions. ESG initiatives are becoming really important to all stakeholders. 

Q: ESG covers a vast spectrum of potential activity. How can insurers find the most important areas to focus on? 
A: It depends on the organization because no one size fits all. Data is the centre of everything and many of our customers are looking for a ‘pillar by pillar’ approach. So, for example, within the environmental pillar they are collecting data and measuring it. Organizations should take the issues that are the best fit for them and make sure data is delivered in a trusted way. 

But what data should companies be looking at and how do they measure it? For example, we are working with one of the largest counties in California on wildfire data. It is one of the highest risk counties with the most-visited national forest. We are providing well-created, trusted wildfire data to them so that the county can develop a fire plan. Which third-party data is important to a particular insurance provider is a key focus area. Precisely is focused on data integrity, we help our customers in understanding the ESG data supply chain, assessing ESG value drivers and metrics, as well as providing well curated third-party data such as dynamic weather, flood data and so on.

Q: ESG initiatives can seem like they are more of a cost to an insurer, and less of a revenue-generating opportunity. How can we flip the perception of work on ESG measures to show the organization’s decision-makers and leadership that pursuing ESG is a vital part of their overall model? 
A: First of all, engaging with ESG prevents these companies from being slapped with fines. Compliance isn’t just a tick box exercise. The regulatory and legal requirements are vital and violating them means significant fines. So, certainly, insurers will save cost, not create them here. 

Secondly, insurance organizations have realized that while ESG has a large aspirational component, balancing the business impact is critical in the sustainability of those goals.

Moreover, recent regulatory developments are forcing insurers to meet expectations with actions, especially on climate concerns. The US Securities and Exchange Commission (SEC) released its climate disclosure requirements proposal in March. 

On November 28, 2022, the European Council formally adopted the Corporate Sustainability Reporting Directive (“CSRD”). The CSRD will replace and significantly broaden the scope of the existing sustainability reporting requirements.

At the end of the day, insurance companies will be minimizing risk, minimizing impact from climate change, and will attract customers and investors who are aligned with the ESG initiatives. Their stakeholders are much more conscious of the importance of ESG initiatives, especially post COVID. There is definitely a shift towards organizations having purpose and contributing towards the overall social good. 

Q: Even the most well-intentioned companies are on a journey and sometimes that journey can either have missteps, or be perceived as ‘greenwashing’. How do insurers make sure their initiatives are genuine? 

A: Create transparency with data. They should define the ESG value drivers and the metrics that they’re going to use and share those details with stakeholders. That creates transparency and trust. Then, during that data discovery process, cataloguing, identifying value drivers and metrics, understanding the ESG data supply chain, assessing data quality, and governing it using an automated framework over time will be important. 

Q: What do you hope attendees will take away from this session? 
A: I would say, inspiration and putting into action. ESG isn’t really about doing it for a single company. It’s for the next generation. I’m very passionate about it and I really hope the audience will get a sense of that. We have an important role to play. Start small, pick the most important data set for your own business and put an ESG framework in place. I cannot overemphasize the importance of third-party data enrichment in this process. Context will play a critical role. Assess the metrics, measure data quality and ESG readiness for your business, develop a governance framework, automate, then add in the next data set, and then the next. Evolve from there.
Join Precsiely’s Dr Tendü Yogurtçu and other market-leading experts to learn how to ‘Leverage ESG for Better Business Outcomes’ by joining this webinar on Thursday, Dec 08 2022 at 5:30 PM GMT. Join here: https://www.brighttalk.com/webcast/16535/561276

Precisely, Webinar, ESG, Climate Change, COP27, Insurance, Reinsurance, Dr Tendü Yogurtçu, Global

Intelligent Insurer