ESG concerns amid growing scepticism of corporate claims

As the association which represents underwriters at Lloyd’s launched a new CUO committee with a remit which includes advice on the rising issues around the need for greater ESG, there is further evidence, if needed, that investors and clients are taking a far closer look at companies’ climate credentials.

This week the Lloyd’s Market Association (LMA) announced the formation of its CUO committee, saying currently, the LMA’s underwriting-focused committee structure is comprised of business lines. It had identified the need for a dedicated panel which will include chief underwriting officers and active underwriters to guide its members and work with Lloyd’s on an increasing number of long-term challenges in the underwriting space.

Part of the remit includes addressing and advising on subjects such as the development and implementation of Environmental, Social and Governance (ESG).

Patrick Davison, underwriting director of the LMA, explained: “The Lloyd’s underwriting community is constantly adapting to new challenges. It has become clear that a committee of senior, experienced individuals is needed to provide expertise and guidance over the coming years. As issues such as market digitisation, the evolution of Lloyd’s in a rapidly changing and competitive environment and ESG rise in prominence, it is vital that we, as an organisation, are providing our members with the right support to address challenges in a strategic and considered manner.”

Timing is everything and the announcement came on the day analysis was published that found higher levels of greenhouse gas emissions were negatively associated with market value, whereas climate change initiatives were positively linked with market value.

The study included businesses from 35 countries and surprisingly, climate change initiatives were positively related to increased levels of greenhouse gas emissions. The presence of a board sustainability committee, which plays a crucial role in designing environmental initiatives and introducing best sustainability management practices, was also associated with higher greenhouse gas emissions.

“Overall, our evidence supports the symbolic legitimation/greenwashing view in that firms are likely to employ process-based climate change initiatives under a symbolic approach to create positive impressions among stakeholders and protect their legitimacy,” the authors explained.

Given the risk market’s central role in the fight against climate change the need to ensure that its climate and ESG strategy and with it their public declarations can be substantiated, can have a huge impact on their reputations and that of their clients.

It is clear at present the (re)insurance industry recognises the need to get its own house in order before it can engage or guide clients on their ESG strategies. The issue is that the world they do internally can be impacted by the actions of their supply chains and the risks they are willing to assume.

Jon Guy, Editor,

Emerging Risks