Climate change holds risk, but also opportunity
If insurance executives cannot see any projected value created by an environmental, social and governance policy, maybe they need to reconsider their approach, a Bermudian climate risk expert has said.
Venetia Furbert was responding to comments made by William Stone, the chief executive of SS&C Technologies, that he had ESG “beaten” into his head for four years.
As a panellist at the Bermuda Risk Summit 2023 held this month, Mr Stone said: “You have to make sure, on the ESG side of things, you are efficient at it, otherwise you are taking all kinds of corporate resources and will not generate any more sales or profits. It might generate some halos — we want those — but shareholders get tense if you do not get your numbers.”
Ms Furbert, who works in climate risk in London, said ESG is about more than corporate responsibility.
“It is a complex analytical framework focused on sustainable value creation instead of a moral quandary imposed onto businesses,” she said.
Ms Furbert spoke at the Bermuda Risk Summit in 2022 on ESG and the future of ILS.
She started out as a reinsurance claims adjuster in Bermuda in 2011. Although she intended to stay only long enough to earn enough money to go back to school and get a master’s, she fell in love with the industry.
“I was a claims assistant for two years,” she said. “Then I became a financial lines underwriter.”
She was particularly fascinated by how climate change impacted insurance. She spent six months last year working as an ESG manager at Axa XL’s office in London. She has also worked as an intern at ratings agency S&P Global and on a short-term contract as a project manager with the climate and public sector business development team at Munich Re in Munich, Germany. Now she is looking at starting her own business venture.
“I remember at a conference I asked how climate change was accounted for in insurance portfolios,” she said. “The response I got was that climate change was accounted for in how reinsurers assessed natural catastrophe risk.”
And she was told that because insurance contracts were renewed on an annual basis, the industry could easily keep up with the rate of climate change.
Now she points to the Stern Review, compiled by the British Government in 2006, that called climate change “the greatest and widest-ranging market failure ever seen”.
“The consideration of the environment is not currently integrated into our financial decision-making process, and because of that the impacts that we make on the environment are an economic externality,” she said.
Ms Furbert said we are seeing climate change that is beyond the natural climate variability.
“It is caused by humans,” she said.
Although she has a focus on the environmental side of ESG, diversity and inclusion is also important to her.
“The only way that we can innovate in the risk industry is by incorporating the lived experiences of others,” she said. “The state of the world has changed and now we need a broader outlook.”
And she said the social and governance angle of ESG is not just “nice to have” but vital if a company wants to avoid causing harm to their employees, clients and suppliers.
“We think of ‘social’ as how the business operates, but the other side of that is key — the concept of double materiality,” she said. “Not only am I understanding the impact this has for the risk of the company, but also the impact that the company has on the outside environment and the broader society.”
She said it is common for discourse on climate change to focus on its negative impacts, but there are also opportunities.
“That is the exciting part,” Ms Furbert said. “How corporations can understand ESG risk and opportunities in light of social is very important. That is where the innovation is. It is also a once-in-a-generation opportunity to create a new economy, society and social contract that is rational, and reflects the current state of the world.”
Ms Furbert encouraged more Bermudians to get involved in climate-related work.
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