Why should insurers care about ESG?
Discover a framework for building ESG reports, which can help in attracting top talent and improving brand reputation.
Good corporate citizenship has always been closely tied to the insurance industry, which exists to provide support to people who need assistance during some of the most challenging moments of their lives. But for a number of reasons environmental, social and governance (ESG) reporting is more important than ever for the insurance industry.
Once a reporting framework that was used primarily by publicly traded companies, allowing potential investors to better understand a company’s efforts in key areas before investing, ESG has become equally valuable for private companies. It’s a framework for any company to report out on topics that are increasingly important for customers, employees, vendors, regulators and other stakeholders who want to know the companies they’re working with, and giving their dollars to, are good corporate citizens.
Specifically for the insurance industry, there are very good reasons to consider building ESG muscle:
- Talent: The insurance industry is in heavy competition for talent — both within the industry and with other industries — and many of the best and brightest people are wanting to work for companies that are engaged in addressing social issues.
- Customers: Similarly, consumers are increasingly demanding information about the companies they do business with. ESG provides an excellent framework to share the work that a company is doing and the work that it’s planning to do.
- Reputation: ESG can also help improve a company’s reputation — and the public is more likely to stand by a company in times of trouble if it has an existing and strong reputation as a good corporate citizen.
The pandemic has accelerated some of these trends, and corporate responsibility is undergoing a fundamental evolution. People are pausing and reflecting on where they want to work, how they want to spend their time and how they want to spend their dollars. The pandemic also shone a very bright light on inequity issues and the systems and processes that underrepresent people of color. ESG reporting provides an opportunity for insurers to take a closer look at where they stand on social and environmental issues, and — more importantly — let their customers and stakeholders know what they’re doing to help address inequities going forward.
Further, addressing climate change has become a business imperative. As we see more frequent wildfires, hurricanes and severe weather, it’s incumbent upon the industry to be part of the climate solution.
If you’re new to ESG reporting, it can feel a bit overwhelming. Many ESG reports are dauntingly massive — even hundreds of pages — but don’t let that deter you. You can start small — think ESG report card, or an ESG infographic. The important thing is to start having the conversation.
CSAA Insurance Group, for example, recently transitioned to ESG reporting from the more traditional Corporate Social Responsibility (CSR) approach. We issued what we called a CSR Snapshot in 2019 — not much more than an infographic — and intended to update it this year with 2020 data. But as we began the planning process, we quickly pivoted to the more ambitious ESG reporting, because it provides a stronger framework for setting more definitive goals, measuring results and building in best practices to ensure we are good stewards on behalf of our constituencies. The report was a heavier lift, but it forced us to have a lot of conversations we weren’t having broadly and made us really think about where we were and where we want to be. We did a lot of work on the environmental side, looking at best practices for reducing our environmental footprint, and we’re working right now on setting some ambitious goals.
Our first-ever ESG report was issued last July, sharing 2020 data and goals, along with a story of our progress in each area. We consider it a living report that will continue to evolve with our journey. We’re targeting April 2022 for issuing an updated report covering calendar 2021.
If your company hasn’t been asked about where it stands on ESG issues, it’s just a matter of time. Growing societal concerns around ESG issues will continue to put pressure on insurers to increase the adoption of environmental sustainability and provide more transparency around social issues and governance.
As the public increasingly holds insurers accountable, we will all need to step up to do our parts.
Danielle Cagan is vice president of consumer, sustainability and reputation at CSAA Insurance Group.
Opinions expressed here are the author’s own.
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