ESG a giant ball of confusion

The concept of ESG has been labelled “a giant ball of confusion”, with the lack of standard metrics to measure and evaluate performance a major stumbling block for the market.

The comments were made by Nick Dunlop, (pic) managing director at WTW, as part of a panel session on ESG integration in (re)insurance which took place at the New Statesman’s ‘Global Re/Insurance: Shaping the Future of Risk’ event in London this week.

His comments were made in opposition to the notion that there is a single defining concept of ESG – instead he suggested a more segmented and granular approach should be taken; one which focuses on the separate environmental, social and governance aspects of the over-arching topic. By drilling down in this fashion it will be easier to quantify an organisation’s approach and also to evaluate progress, he added.

Attempts are being made by the market in this area, however. This year, for example, Chaucer has collaborated with Moody’s to launch a data-driven ESG scorecard across underwriting, investments, and operations.

The scorecard seeks to measure the ESG performance of clients and business partners, helping them achieve sustainability goals.

The ESG Balanced Scorecard uses 158 data points to assign scores for corporates based on different environmental, social, and governance factors. Metrics include disclosure of greenhouse emissions; integration of environmental factors into the supply chain; health and safety conditions of workers; involvement in the local community and support of local infrastructure; and boardroom diversity.

Also on the panel, Rachel Tusk, group head of strategy at Beazley, noted that ESG has really taken off in the corporate world over the past eighteen months, and that business leaders appear to care much more about ESG concepts now.

However, she accepted that significant challenges remain: “It can be quite overwhelming as an idea to think ‘how are we going to embed this enormous topic of ESG into our underwriting practice and how are we going to embed it into the business? It’s easy to sit back and think that it’s someone’s else’s problem.”

“I think there is a nudge economics point here as well- every small step that each of us makes individually and within our organisations is huge collectively. We do have a big lever to pull, but we also have lots of tiny levers to pull which will add up to a big lever… and then suddenly we are making a lot more progress.”

The ESG scorecard seeks to measure the ESG performance of clients and business partners, helping them achieve sustainability goals.