Days after Aviva warned UK businesses not to ignore the threat of climate risk, specialist insurer Beazley’s revealed that its new study had found environmental issues are at the bottom of business leaders’ concerns and set to fall further in 2022.
The report, Spotlight on Environmental Risks, is the latest in Beazley’s Risk & Resilience series which compares business leaders’ attitudes to different categories of risk and assesses perceptions of resilience.
It found only 12% of business leaders across ten industry sectors in the UK and US rank environmental concerns, including pandemic, climate change, environmental damage, food security and energy transition as their top risk category in 2021, falling to just 9% looking forward to 2022.
The report stated: “This risk grouping represents the most rapidly evolving category of risk and attitudes to these potential perils are changing at a similar pace. We were surprised that business leaders ranked environmental risks very low in their list of risk concerns when we undertook this research earlier this year, even predicting that their concern would diminish further over the next twelve months.
“However, C-suite sentiment is likely to have shifted markedly since our field research was conducted as a result of a combination of factors: rising natural catastrophe severity and frequency, supply chain and energy price inflation, continued high COVID-19 infection rates and heightened regulation and litigation.”
Beazley’s research highlighted that businesses’ may be focusing much of their effort on the interconnected legal, reputational and regulatory risks of compliance with ESG reporting, rather than actively addressing environmental risk, with 18% ranking political and regulatory risks their top concern in 2021.
Chris Illman, Head of Responsible Business, Beazley said: “The discussions and announcements at the recent COP26 summit, demonstrate the increasing stakeholder, governmental and regulatory pressure that businesses now face to align their operational practices to the fast-changing environmental agenda. Failure to do this will result in increased legal, reputational and regulatory risks. So, it is surprising and concerning, that our research reveals that environmental risks ranked so low on business leaders’ list of concerns.”
He added: “Environmental risk mitigation presents a significant challenge. The complexity and interconnectivity of the risks have the potential to generate claims that straddle traditional areas – from pollution and environmental damage, through to new areas of risk like greenwashing and reputation damage.
“But they also represent an opportunity for specialty insurers like Beazley to work with clients to go beyond pure risk transfer to improve management and mitigation of risks to minimise the likelihood of a loss event.”
“We believe that firms that heed ESG principles are likely to be better risks over the long term,” Illman continued. “ESG considerations will become an increasingly significant underwriting factor in the coming years, and we are keen to build relationships with, and support clients that demonstrate strong ESG credentials at this stage.
“We recognise that as an industry, we have not seized opportunities as soon as we should have. We cannot accelerate further now without leaving our comfort zone. This will require greater investment in and sharing of data and as we learn more about how ESG principles can reduce risk, we will build the lessons into our underwriting, claims and investment process to deliver innovative insurance solutions that provide additional cover to clients that perform highly against established ESG metrics.”