SIRC 2021: ESG critics too pessimistic, says Swiss Re’s Higginbotham
November 17 2021 by Nick Ferguson
Criticism of the global (re)insurance industry for not moving fast enough on environmental, social and governance (ESG) issues reflects a “glass-half-full” pessimism, according to Swiss Re’s Russell Higginbotham.
Speaking on a panel at the 2021 Singapore International Reinsurance Conference (SIRC) on November 16, the reinsurer’s regional president for Asia said that he was optimistic that the industry is on the right path.
“There’s a lot of momentum around this topic,” he said.
While noting some disparity between “early adopters, fast followers, the main group and the laggards”, he pointed to a groundswell of public opinion and regulatory action that is forcing companies to make progress in addressing a range of ESG issues.
“We’re seeing industry bodies and individual companies moving in the right direction, but reaching agreement on what you should be measuring and what constitutes full compliance is a really tough task,” Greg Carter, AM Best.
Not everyone on the panel agreed with this upbeat outlook. AM Best’s Greg Carter warned that the industry still has a long way to go in following through on some of its commitments.
“There’s lots of good intention, but certainly less action,” he said.
Mobilising the industry’s US$35 trillion of assets under management has a huge role to play in funding a sustainable future, but aligning underwriting standards around a common approach to ESG goals is potentially even more powerful — and more challenging.
“We’re seeing industry bodies and individual companies moving in the right direction, but reaching agreement on what you should be measuring and what constitutes full compliance is a really tough task,” Carter added.
Climate change
This is most clearly seen on environmental issues. As former Bank of England governor Mark Carney said in a famous speech at Lloyd’s in 2015, climate change represents a “tragedy of the horizon”.
Insurers, like all other businesses, stand to benefit in the long run from limiting global warming, but shareholders judge them on their returns over the next few quarters. And in a battle between stakeholders and shareholders, it’s the people with votes who tend to be heard.
Where legislation has also failed to keep pace with public opinion on ESG issues, companies can be placed in the difficult position of defining for themselves what constitutes legitimate activity, whereas in the past it was enough just to act within the law.
“We are pressured by our stakeholders to pass value judgments,” said Yulanda Chung, head of sustainability at DBS. “Governments have not stepped up and the private sector is now expected to pick up the slack.”
While this conveniently ignores the effect of private-sector lobbying, everyone agreed that governments and regulators have a vital role to play in working with industry to ensure a more sustainable future.
“This isn’t a single company topic, it’s not a single sector topic,” said Higginbotham. “It’s one for standing together and getting the problem solved. And I feel positive about that.”
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