ESG holds key to recruitment challenge

Swedish risk and insurance managers are becoming increasingly involved in ESG as the topic rises rapidly up the corporate agenda. For example, Henrik Paajarvi, risk manager at the Norway-based packaging and insulation group BEWI and a Swerma board member, is currently in the process of reinforcing the group ERM framework with sustainability a central theme. “It also goes hand in hand with insurance,” he said, referring to the relationship between environmental factors and property cover. There has been a sharp rise in sustainability disclosure requirements through regulations or voluntary reporting frameworks such as the Taskforce on Climate-related Financial Disclosures (TCFD). This information could prove valuable to risk managers. “Risk assessments and ESG reporting go hand in hand. It is crucial for us to evaluate our risks to map potential negative impacts, as well as opportunities, related to ESG topics, so that we can measure and manage our progress,” said Paajarvi. One of the main reasons for the introduction of more ESG disclosure and reporting requirements is the threat of greenwashing, whereby companies make unsubstantiated claims about their sustainability performance. From an insurance perspective, this has raised the risk of D&O claims if a company sets sustainability targets and then falls short. “A lot of companies have made statements about their sustainability goals – for example to be carbon neutral by 2030,” said Johan Rodert, risk manager at Autoliv and chairman. “And now insurers are getting more concerned about the prospect of companies not meeting these goals and then facing shareholder lawsuits. You need to show progress in terms of your sustainability pledges and whether you are on track to meet your goals,” he explained. Reporting requirements have been made more complex by challenges around the availability and consistency of data. For example, it can be difficult to get hold of ESG data from companies in your supply chain, said Charlotte Herner, risk and insurance manager at Swedish construction firm Svevia. Additionally, there is a huge number of metrics purporting to measure the same thing, such as CO2 levels, but with little consistency between them. There is the same inconsistency with ESG ratings and scores. “You have to find one metric and stick to it,” said Rodert. “That is easy enough to do internally but much harder when it comes to your suppliers and sub-contractors.” The link between sustainability and risk management suggests potential synergy between the roles. Will the sustainability manager become a dedicated role in most companies and how will this affect risk managers? Will risk managers be able to fulfil this role? Or, will they be sidelined as insurance buyers as sustainability races up the boardroom agenda? “We all see sustainability as an increasingly important part of our role and I work very closely with our sustainability team,” said Paajarvi. “We have different tasks and maybe different perspectives – I work more on the physical side whereas they are more focused on the social, governance and organisational aspects. That said, I expect social risks to become an increasing part of the risk managers’ role.”

ESG holds key to recruitment challenge

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