In a world influenced by the impacts of climate change, people are understandably demanding greater transparency from companies about their business strategy and operations. In particular, stakeholders want to know how companies are meeting environmental, social and governance (ESG) criteria; they want to know how “green” their investments are; and they want to know what actions are being taken to make our world a better place.
The evolution of ESG as a key business policy and strategy driver is in many ways rooted in its precursor, Corporate Social Responsibility (CSR), which is a policy-shaping process which was first coined in the 1980s as a way of helping companies take ownership of their impact on society, and to measure and quantify efforts.
It is this sense of future-proofing our planet through sustainability that is driving companies – big and small – to adopt business models which have ESG and CSR criteria and measurement initiatives at the heart of their strategic focus. These initiatives vary, from harnessing renewable energy, reaching that all-important “net-zero” milestone, and implementing fair and ethical working practices. But no matter what route they choose to follow, increasingly companies are focusing on ensuring their actions and investments have a positive influence on the economy, society, and the environment
The scale and success of these initiatives can be independently measured by the Dow Jones Sustainability Indices (DJSI) – one of the world’s most recognisable sustainability indices. Compiling the top global companies leading the way with sustainable practices, it has quickly become a benchmark for delivering on both the Paris Agreement and United Nations (UN) Sustainable Development Goals (SDGs), and gaining entry is perceived as a “badge of honour”.
Insurers such as Network members Allianz and AXA as well as Zurich have, over the last few years, held the top three positions on this list. Allianz for instance, has committed to net-zero greenhouse gas emissions across various portfolios, offers sustainable products, and nearly 40% of its senior business managers are female.
Regional competition is also strong. Bradesco, for example, was proud to confirm it was the best bank among its Brazilian peers, while MAPFRE shared its success as one of only 19 Spanish companies to make the listing, thanks to its MAPFRE AM Inclusión Responsable programme, which focuses on the “S” element of ESG, by promoting the inclusion of people with disabilities in its workforce.
The current landscape
This emphasis on the social aspect of the ESG criteria echoes and builds on the goals of many longer-standing CSR initiatives, from ensuring diversity and inclusion in the workplace to funding youth and women’s empowerment programmes. Understanding the scale and wider impact of these initiatives, however, is being hindered – not necessarily through lack of trying by insurers, but perhaps by a lack of greater public transparency and reporting.
Details were unearthed by students of the Katie School of Insurance and Risk Managementat Illinois State University in the United States, in a white paper published in late 2020 with the support of the MiN – ‘Investigating the Social Component of Insurers’ Sustainability Practices’. The report explored what sustainability and social aspects insurers were reporting and on the whole, it seemed that only members of a group, namely UNEP’s Principles for Sustainable Insurance signatories, such as the Insurance Development Forum or the MiN itself, actively divulged detailed information on CSR initiatives.
For CSR activities to progress meaningfully, however, we need to fully understand what is going on; we need to know what requirements are being met and where gaps remain so they can be addressed and resolved. In this respect, surveys can be a useful tool to gain a sense of the landscape, something the Global Federation of Insurance Associations (GFIA) has undertaken recently to gauge member achievement on meeting specific marketing, product, and educational services required for women’s insurance – as well as measuring internal practices for advancing diversity and inclusion in the workplace.
The importance of gender equality is something of a deep-rooted focus for MiN, particularly in reference to financial stability. As we have highlighted previously, there are ongoing social, cultural and technological barriers that women face on a daily basis, many of which exclude them from accessing insurance and wider financial services. To attain a sustainable future, however, this imbalance needs to be addressed, and is why gender equality and empowerment for all women and girls is listed in the top five UN SDGs.
Under the microscope
In the aforementioned Katie School white paper, just over half of the 117 insurers sampled offered microinsurance products, including life, health, agriculture, property, accident, and vehicle insurance.
Most of these insurers were based in Europe and the Asia-Pacific region; although, it is difficult to paint a comprehensive picture of the wider landscape given that 48% of insurers sampled were not reporting their full sustainability or social actions. Combine this with the overwhelming perception that many brokers lack support for microinsurance or sustainability initiatives, and it would seem that a case for CSR schemes – and how insurance fits in with this – is required.
In this respect, investing in microinsurance is more than just a tick in the box. The latest wave of pilot projects have demonstrated the validity and importance of this form of insurance, particularly for those communities and sectors often left unprotected and, therefore, faced with potential hardship when the unfortunate happens.
The agricultural industry is one example where a lack of cover can have a detrimental impact on farmers, who regularly find themselves at the mercy of market conditions, extreme weather, or faced with challenges of inequality and the relentlessness of climate change. When crops do fail or livestock dies, farmers are not only impacted first, but they tend to be worse off; and yet despite these known scenarios, farmers still have little access to funds to insure themselves against these risks, meaning the protection gap throughout this sector remains widespread.
Thankfully, with CSR now playing a notable role in the delivery of wider ESG goals, the number of insurers becoming actively involved within the space is on the rise. Blue Marble Microinsurance, who recently joined the MiN, has, for example, created Café Seguro, an index insurance programme for coffee farmers in Colombia, incollaboration with Nespresso. Around 80% of these smallholder farmers have little to no access to insurance - so providing an affordable solution that provides payouts in the event of excessive or inadequate rain, for example, not only means these farmers are able to “stabilise their incomes”, but it allows them to carry on investing in their farms, something that most likely wouldn’t have happened if they didn’t have insurance.
Argentinian-based insurance company Rio Uruguay Seguros (RUS) is also at the forefront of delivering on CSR initiatives, not only through the formation of a female-majority management team, but through its role in the field of microinsurance. Influenced by the impacts of the COVID-19 pandemic, RUS carved out a route to reach, and therefore provide insurance to, the underrepresented of society, including those on low incomes and those excluded by social barriers, such as gender, ethnicity or age. Titled “Insurance for Equity”, the RUS programme has so far been a success.
As with all these CSR programmes, education plays a leading role, not only for understanding, but for acceptance too. This approach has been demonstrated by South African insurer and long-standing Network member Hollard, through its financial literacy programme StreetWise Finance (SWF). Developed by Hollardite Corporate Social Investment volunteers, SWF teaches financial basics to those in need, from budgeting right through to using gamification methodology, and is just one of several programmes currently being run by the insurer.
The role of insurance in CSR doesn’t end there however – understanding and providing measures to mitigate risk are just as important, whether that’s through a smart watch to monitor fitness levels as part of a health insurance policy, to providing fire extinguishers to help prevent fire damage as part of a fire policy. Prevention is clearly better than cure, and easy-to-access and affordable insurance needs to be a fundamental part of that prevention plan.
Success breeds success
With much of our future dependent on the actions of others, incorporating effective, measurable and transparent ESG and CSR strategies into all aspects of insurance - whether that be risk management, investments, underwriting or claims - is something all insurers should be striving to put front-and-centre of their business and operational strategy. However, as the authors of ‘Investigating the Social Component of Insurers’ Sustainability Practices’ report have recognised, to really understand the challenges and pinpoint where progress is required, we need to know precisely where the industry stands with its sustainability goals and achievements; and for that, we need everyone to not only report what they are doing but also to highlight the impact and benefits of their actions so we can all learn and take a leadership role in addressing these critical issues.
In sum, working collaboratively to generate impact to improve the quality of life of those who need it most through insurance. This is of course, easier said than done, but working together and having all stakeholders rowing in the right direction is a good start.