Our Environmental, Social & Governance (ESG) forum in London gathered leaders from across the market who are committed to embedding ESG goals and practices within our industry. The theme of the forum was “Perspectives,” and we wanted to both celebrate successes and explore next steps.
The concept of ESG principles has taken something of a political battering in some quarters in recent months, and some high-profile organisations have watered down or pulled back from some of their previously stated commitments.
We wanted our forum to help refocus efforts, and to underline the progress that our market has made, while acknowledging that there is still a long way to go. The Lloyd’s and London insurance market is uniquely placed to drive good ESG practice within our own companies and to help our clients to meet their own ESG goals and aspirations.
How could we not?
During the forum, one of our speakers – an imagination activist – challenged attendees to move beyond thinking “we can’t” and instead to think: “how could we not?”
This is perhaps a new way of thinking for many of us. But when we consider the scale of the challenges we face – particularly regarding the transition to net zero – it’s maybe a useful way to reframe our attitudes towards embedding ESG principles in our own organisation and in the way we work with clients.
ESG targets cannot and should not be simply box-ticking exercises. We need to use ESG aspirations as a lens to think about businesses differently and to see the opportunity inherent in making changes.
Internal activism
Forum attendees heard from leaders across the Lloyd’s and London insurance market, as well as experts from different fields, about some of the ways in which they are helping to foster good ESG practices within their own companies and to proliferate these across the market.
These changes are often about empowering individuals to adopt behaviours, take risks and seize opportunities. It’s vital that there are role models within our marketplace exhibiting the fundamental nature of ESG standards to the way we do business. As one of the panellists pointed out, if you role model behaviours you see those behaviours reflected back at you.
Creating environments in which colleagues feel empowered to take risks – and are rewarded for so doing – is vital to making the culture shifts needed to rise to the ESG challenge.
The longer-term view
One of the great challenges in demonstrating the value of ESG goals is balancing the short-term demands of shareholders with longer term challenges, particularly our changing climate.
The insurance industry is, in a sense, the “first responder” when natural disasters occur and that gives us a wealth of knowledge about the impacts of a changing climate on societies and business. We need to find ways to translate that knowledge into longer term thinking for many clients.
This is a complex task. But we are beginning to see companies think differently about just who – or what – is a stakeholder, with some now giving nature a greater “say” in decision-making, for example.
The insurance industry is well placed to help clients see the longer-term picture while being mindful of the need to address potential conflicts in addressing the “E” in ESG with consequences for the “S” of ESG. The goal of a just transition must be uppermost in all of our minds as we make these shifts.
Bold new thinking
The insurance industry is thinking innovatively about ways to cover the risks and opportunities associated with the changes that its clients are making to meet their own ESG challenges.
Heather Pace Clark, carbon leader at AXA Climate and one of the panellists at the forum, illustrated some examples of clients that are thinking differently about the way they do business and the ways in which insurance coverage can be adapted to help them do that. Food and beverage producers that are considering reducing their use of pesticides, for example, or using different farming methods like regenerative farming, may experience fluctuations in yield.
The insurance industry needs to use data to understand that changed risk picture and to design insurance products to support clients in managing those risks, she explained. It will be critical that these types of products are designed almost like loans – and perhaps even sold alongside them, she noted.
As our clients become bolder about making ESG goals fundamental to their business models, so their insurance partners must think in new and innovative ways to support them.
Spreading the word
One of the beauties of ESG practices is that not everybody needs to know everything. Nor can they. But practitioners in our market have the opportunity to develop expertise in their particular sphere, and to share knowledge with colleagues to help them adapt too.
The Lloyd’s and London market prides itself on being a hub of intellectual property and a space in which collaboration has driven the insurance industry forwards. But there is more to do.
We hope that this forum, and events like it, will have helped to give fresh impetus to our collective effort, to showcase changes that we can make, both big and small, and drive us on to meet the evolving challenges that we and our clients face.
