The insurance response to ESG pressure in 2024
Here's a look at one insurance company's response to current corporate ESG pressures.
Whether you call it ESG (short for environmental, social, and governance), sustainability, or corporate responsibility, there is a growing pressure on today’s companies to focus their impact on communities, the environment, and society as a whole.
Hamilton, Bermuda-based Aspen Insurance recently published its 2023 Sustainability report about its efforts in response to the current corporate environment surrounding ESG initiatives.
“Our report demonstrates Aspen’s focus on strengthening the building blocks for a committed and progressive sustainability strategy,” says Giselle Yeung, vice president of environmental, social and corporate governance, Aspen. “In 2023, we created dedicated ESG roles in Governance and Investments, and formed a Sustainability Committee, which reports to our Group Executive Committee, believing that these strong foundations will guide us and keep us true to our values for years to come. The Aspen values and strong culture are a driving force for our activity in the sustainability space.”
Donna Szatkowski-Zych, audit and assurance partner, Deloitte & Touche, is seeing that more organizations prioritize ESG capacity building, due in part to the increase in disclosure requirements from global regulatory bodies. In fact, Deloitte & Touche’s 2024 Sustainability Action Report found an uptick in the prevalence of cross-functional ESG working groups, chief sustainability officers (CSOs), and ESG controller roles, indicating there is a greater appetite at the C-suite level to embed ESG governance and priorities into broader organizational strategies.
“Companies are rising to the challenge of a rapidly changing ESG landscape. We’re already seeing significant progress in the investment of time and resources in ESG reporting capabilities,” Szatkowski-Zych says. “And as regulatory bodies like the US Securities and Exchange Commission and similar agencies continue to define what metrics and data they need from companies, we expect to see even greater investment.”
Indeed, as showcased in Aspen’s 2023 report, the company’s ESG approach indicates significant progress made on the company’s sustainability journey in different areas of the business.
“Our priority has, and will continue to be, putting the structure in place to adapt to new requirements and make a positive impact on our local communities and the planet at large,” Young says.
What is also evident is Aspen Insurance’s dedication to sustainable insurance practices and ambition to continuously enhance their evaluation-based underwriting criteria. Aspen’s approach is to be transparent and accountable, creating impact by taking thoughtful and responsible actions.
Working together with clients, partners, and regulators across the industry, the Aspen team is developing innovative solutions that address challenges, raise awareness, and actively manage risk. In 2023, this was evidenced by Aspen’s partnership with kWh Analytics to provide an industry-first, data-led product that encourages resilient design, construction, and management of solar assets, after which InsuranceERM, named Aspen and kWh Analytics winner in the category of “Climate and Sustainability Collaboration of the Year” during its inaugural Global Climate Risk & Sustainability Awards ceremony.
“We continue to see natural catastrophes, heartbreaking conflict, and economic instability across the globe,” Young says. “These events not only have an impact on the insurance industry, but also on our colleagues, clients, and communities — from increased cost of living pressures to safety and security concerns for some.”
These represent a stark reminder for businesses like Aspen to do what they can to make a positive impact on local communities and the environment, ensuring the broader concept of sustainability is more relevant than ever.
“For Aspen, sustainability is about helping our clients when they need us, delivering for our shareholders, supporting our communities, and creating a nurturing, diverse and inclusive working environment for our colleagues,” Young says. “We’re here for the long term.
We are proud signatories to the UN Global Compact, UN Principles for Responsible Investment, and UN Principles for Sustainable Insurance, aligning our values with global standards.”
Insurance concerns related to ESG
Szatkowski-Zych points out that escalating global risks, including rising concerns around climate change, are challenging the insurance industry’s capacity and readiness to respond effectively. Deloitte & Touche’s Insurance Outlook 2024 highlights that insurers are increasingly focused on reducing financially unbearable risks caused by natural disasters and other climate activities.
“Our report “Enabling sustainability for insurers through the cloud” found that insurers are prioritizing sustainability as a tool to help proactively address climate-related risks, leveraging cloud-based technology solutions to streamline processes and enhance existing capabilities,” Szatkowski-Zych says. “To address the widespread concern about the impact of climate risk on property investments, the industry should consider mitigating the loss of biodiversity and natural resources, which exacerbate climate events and lead to substantial financial losses.”
Additionally, Deloitte & Touche’s Underwriting Earth report illustrates how the insurance industry can be a catalyst for change in preserving natural capital.
“By focusing on underwriting practices that support environmental sustainability, insurers can help protect and restore natural resources, which are essential in mitigating climate risks,” Szatkowski-Zych says. “And by addressing these concerns, the insurance industry can play a pivotal role in advancing corporate ESG strategies and helping to create a more sustainable future.”
Looking ahead
So what does the future of corporate sustainability look like? How will it evolve?
For the (re)insurance sector, Young notes that there will be an increased focus on embedding sustainability considerations into underwriting and investing analyses and decision-making, arguably one of the most complex challenges for specialty (re)insurance companies.
However, Aspen believes these efforts will help inform risk management, pricing, accumulations, and capital allocations to improve sustainability practices for the company, clients, and the sector at large.
“While we progressively increase our use of ESG data to enhance our underwriting and investment management practices, the need remains for a uniform industry standard and framework for corporate sustainability reporting across the global (re)insurance industry,” Young says. “Corporate sustainability is a wide ranging and complex subject for Aspen, our customers, and broader stakeholders. Thus, it remains important we continue to be open minded, agile, and pragmatic in our approach.”
Additionally, the Aspen team anticipates there to be a growing expectation that individuals at the heart of a business work collaboratively to demonstrate environmental and social accountability, supporting communities and those less fortunate.
“We are therefore proud of how Aspen and its people continue to step forward to make individual contributions towards important causes, involving themselves in impactful environmental and social projects across the world,” Young says.
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