Three quarters of risk managers believe they should play bigger role in ESG

While more than half of risk managers surveyed by WTW said they play a significant role in managing ESG risks, 77% believe the risk management function should be more involved in in related initiatives and setting ESG strategy. WTW said the main conclusion from its poll of more than 312 companies around the world is that many risk managers have a clear role to play in developing and managing ESG strategies, but work is needed to define where best to focus their efforts. Some 74% of respondents to the broker’s 2022 ESG Global Risk Managers Survey said that improving their organisation’s ESG score is a core focus for their business today. This number drops to 57% in North America. Some 75% of respondents from Latin America said improving their organisations ESG is a core focus, with the percentage at 83% in EMEA and 90% in Latin America. Although 55% of respondents said the risk management function is significantly involved in their companies’ ESG efforts, more than three quarters think risk management should be more involved, with this number at 95% in Asia-Pacific, 89% in Latin America, 75% in EMEA and 66% in North America. WTW said these results show that North American organisations’ commitment to ESG as part of risk management currently lags other regions. Globally, two thirds of risk managers claimed their organisations have clear and specific ESG goals, but only 17% said their companies have documented targets with clear milestones for ESG risks, and 24% said the risk function has no ESG targets in place. Some 32% stated that ESG is currently influencing wider risk management strategy and 42% expect this to the be the case in the next two years. The survey reveals that regulatory issues and reputational risk are the leading drivers of ESG strategy and action in the eyes of survey respondents. WTW said this suggests that the “stick rather than the carrot is still uppermost in a lot of organisations’ minds”. However, it stressed that a “significant” percentage of those polled recognise long-term profitability and risk, changing customer demands and investor sentiment as factors that will drive ESG strategy forward. Focusing on environmental aspects, the survey found that more than 80% of organisations that have documented, or are actively discussing, climate goals have stated carbon or emissions targets. But WTW said the survey results suggest that other climate and resilience risk management goals are “frequently more vague or absent”. Most respondents (54%) believe environmental risk management practices influence their ESG standing and three quarters of respondents have taken actions to address environmental liability and climate risks. However, WTW said many have done so without specific goals or key performance indicators. When it comes to social issues, many respondents identified key risk management priorities in areas such as data privacy and cyber risk (97%), workplace safety (88%), product liability (79%) and employment practice liability (78%). A large majority of risk managers surveyed agreed that progress in risk management practices in these areas can improve their organisation’s ESG standing. In the employment practice liability area, for example, 69% of organisations have specific and measurable inclusion and diversity and/or pay equity goals. More than 80% track pay scales by level and by demographic. WTW noted that risk management and governance tend to intersect most frequently in due diligence linked to risk adviser and broker appointments and reviews. But its survey found that wider risk management involvement in shaping governance policies is more patchy and often compliance-focused. For example, just over half of respondents said they work with procurement teams in areas such as assessing risks associated with supply chain management. ESG concerns down the supply chain are most frequently addressed by encouraging tier one suppliers to engage with those further down the chain. Six in ten companies do, however, also audit their suppliers.

Three quarters of risk managers believe they should play bigger role in ESG

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