Risk managers taking centre stage in ESG

ESG Risk Review talked to Gabrielle Durisch, global head of sustainability solutions at Allianz Commercial, about challenges for risk managers in tackling ESG, being an active contributor and looking at opportunities, and how insurers can help risk managers to take centre stage on sustainability.

What are the main challenges for risk managers in tackling ESG and playing a role?

Gabrielle Durisch: The main challenge is the ever-changing landscape associated with ESG. Reporting and regulatory requirements are rapidly increasing, and being able to understand the different landscapes across different regions is complicated for global businesses. Not to mention understanding ESG risks within complex supply chains such as human rights issues or the reputation of companies you’re doing business with – add to that increased consumer and/or shareholder pressure to adapt or commit to targets and it becomes a topic that can stretch resource and funding quite rapidly.

Additionally, ESG can mean different things for different industries and individuals so it’s important to define and clarify exactly what the focus points are before starting discussions, reports and engagements. ESG covers a wide spectrum – in fact, while it was born a framework to measure performance in those specific areas, it’s now shifted towards a more sustainability-oriented approach that is bound to encompass the whole organisation.

The great thing about this is that it presents an opportunity to collaborate across functions and with senior leadership within organisations.

Is part of the role of the risk manager to be a facilitator and engage with sustainability managers, HR, legal etc to create a holistic approach to ESG risks? How much of a challenge will this be?

Gabrielle Durisch: I think it’s partly to be a facilitator, but also an active contributor to the discussion – the risk manager is perfectly placed to do this. Structure is needed to ensure adequate governance is in place to identify and mitigate ESG-related risks. And this is the biggest challenge, in my opinion – making sure that the flow of information and processes is efficient and, most importantly, effective in driving strategy.

How can the risk manager take more of a proactive role in business strategy and be involved in creating/enabling opportunities in this area?

Gabrielle Durisch: Hot topics in the boardroom are climate change exposure and the opportunities arising from the evolving sustainability landscape – risk managers can get a seat at the table initially to discuss the risks associated with climate change but use this to turn the discussion to opportunities and strategy to address change within the organisation. As the ESG focus continues to evolve, risk managers should be able to embed themselves into further discussions, ultimately being recognised as bridging all parts of the organisation and seamlessly translating risks into strategic actions for the business.

Is the S part of ESG starting to grow in importance (it feels as though the focus has been more on E to date)? What is the role of the risk manager here?

Gabrielle Durisch: I would say that the ‘S’ has never been less important than the ‘E’, but inevitably the environmental side got more traction from businesses for several reasons. Due to climate change and the impact it is having on our societies, we’ve seen increasingly strict regulations forcing companies to comply, which meant a lot of capacity had to be put in this area to ensure adherence to the new requirements.

Another factor to consider is the ability to identify KPIs to track and monitor performance, which can be easier to do for environmental factors compared to social ones, where it can be difficult to identify KPIs that truly measure and are able to show progress. Either way, businesses are now incorporating all E, S and G dimensions into their sustainability reports and we will see more specific and concrete metrics over time to measure impact in the same way we’re now able to do on the environmental side.

Is greater collaboration needed between brokers and insurers in the market to making data requests more manageable for insureds?

Gabrielle Durisch: Collaboration between insurers and brokers has always been crucial and will definitely continue to be so. In the ESG area, we have several active collaborations with global broking players to understand together how to create impact and value for our customers, while at the same time alleviating some of the repeated data requests. What can initially seem insurmountable in terms of creating processes to provide the information needed should be broken down in to smaller steps, explain what is possible and what isn’t possible, see if there is something that already exists that provides the information required and have a discussion with your broker and carrier to understand what is needed and why they are asking for the information. Oftentimes there is something off the shelf already available that can answer the majority of questions.

How does the insurer’s role go beyond risk financing in this area?

Gabrielle Durisch: As insurers, our role goes very much beyond the simple ‘risk financer’. The nature of our business means that aside from simply covering risks, we are also able to drive the conversation and to support our clients in embracing new opportunities by helping them minimise the attached risks.

We should be seen as a risk partner; we can act as an enabler as well as an adviser for our clients to develop their business strategies. We have a wide range of risk engineers and technical experts that are able to support our clients in better understanding and taking actions to mitigate new, evolving and existing risks, and this by itself is a much more valuable role than a simple financer.

How important is it for carriers and brokers to be at the forefront of sustainability?

Gabrielle Durisch: It’s crucial for carriers and brokers to be at the forefront of sustainability. Risk transfer and mitigation or resilience advisory solutions will not only enable the transition but help build resilience to the physical risks associated with climate change and beyond. Furthermore, financial literacy and income protection solutions for those who need them most is a key part to creating resilient communities and society.

Insurers are in a unique position where we can help protect physically through resilience solutions and financially through risk transfer – supporting corporate customers, communities and society to be more sustainable and adapt to the challenge ahead.

Is ESG the chance to (finally) put risk managers in the spotlight?

Gabrielle Durisch: If we want to use the spotlight analogy: I think risk managers have gone from being a background extra or understudy to the rightful star of the show. ESG is definitely putting them in the spotlight, no one is better placed to understand the risks and how to create opportunities in this evolving landscape, but we need to remember that the whole cast, stage hands and everyone else is key in pulling the whole show together.

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