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Materiality of ESG factors beneficial for insurers

28th June 2022 - Author: Kassandra Jimenez-Sanchez

Environmental, social and governance (ESG) factors are material for insurers to consider, act on, and transparently report according to panellists speaking at the S&P insurance conference.

storm-euniceYafit Cohn, chief sustainability officer, and group general counsel for The Travelers Cos. Inc., and Maryam Golnaraghi, director of climate change and environmental topics at international insurance think tank Geneva Assn, spoke on the subject.

They both agreed that there are benefits for insurers in assessing the materiality of ESG factors in their businesses; as well as benefits that come from also considering the material factors in their strategic decision making.

Golnaraghi in particular emphasised the importance of “decision-useful” risk assessment to avoid “analysis paralysis”.

She believes that companies need to go beyond identifying ESG risks and focus on what they can do to address them in their business decisions.

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Cohn and Golnaraghi also agreed that insurance has a role to play in supporting the energy transition.

Cohn mentioned that Travelers offers products and services, such as green building coverage, to incentivize companies to operate in an environmentally responsible way.

She also noted that Travelers has been providing insurance to renewable energy providers for almost 30 years, which she believes facilitates innovation, the growth of these providers, and supports the energy transition over time.

Golnaraghi added that there is a “massive opportunity” for the insurance industry to invest in and de-risk new technology for decarbonizing sectors, such as energy, transportation, and heavy construction

Even though both speakers agreed on the above, they both hold a different opinion regarding the relevance of double materiality.

Golnaraghi said it is “absolutely crucial” for companies to conduct “outside-in” and “inside-out” ESG analyses to ensure their strategies and actions are aligned.

But Cohn disagreed, saying that as a public company Travelers is “laser focused on the fact” that it is a steward of shareholder capital and cannot spend that money in ways that aren’t grounded in shareholder value.

Travelers takes action based on its ESG priorities and considering when it believes is in the best long-term interest of the company and its shareholders.

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