May 31, 2023
UK brokers now have a framework for formulating an environmental, social and governance (ESG) strategy following the release of the BIBA Guide to ESG, co-authored by the British Insurance Brokers Association and law firm Weightmans.
The Guide was launched at the BIBA conference in Manchester in May, supported by a panel on ESG featuring David Nichols, Head of Retail for Zurich; Ben Howarth, Chief Sustainability Officer of the Association of British Insurers; Laura Hancock, Managing Director of Yutree; Baljinder Mahil Head of Distribution Operations for AXA XL; and moderator Abhay Srivastava, ESG Manager for Weightmans (pictured, left).
Better Insurance Network founder Antony Ireland spoke with Srivastava at the event, alongside environmental lawyer Nick Barker, Principal Associate at Weightmans (pictured, right), who explained how the Guide aims to help brokers of any size determine which ESG factors matter most to them.
“The Guide to ESG had to be useful to such a broad range of insurance brokers, from small outfits to much larger organisations, also recognising people are at different points on their ESG journey,” Barker said.
“It lays a foundation for ESG governance, helps identify which ESG factors are material to the business and what the company’s priorities are around ESG, then guides brokers on how to start thinking about developing an ESG policy to deliver on those strategic ambitions.”
In addition to advice on how to conduct a materiality assessment and implement change, the Guide also highlights ‘ESG stepping stones’ – 11 key topics for brokers to consider from carbon management to mental health – and provides some entry-level understanding around these issues.
“ESG is vast in scope, so it’s a constant learning exercise. The ESG guide is designed to allow brokers to dip into those topics, gain an understanding, then conceptualise and convert that into ESG policy,” Barker said.
“We’re looking forward to getting feedback from the market on how this guide is being applied in practice to enhance the BIBA members’ ESG journeys.”
Quick wins and long-term goals
Many brokers are just getting started with ESG, but it’s important they start making tangible progress, even if in small ways. In the panel discussion, entitled ‘ESG for brokers – what to do’, the speakers acknowledged ESG can seem like an overwhelming topic but urged delegates to focus on quick wins such as reducing operational waste, switching to renewable energy sources and implementing employee benefits like menopause policies and mental health services.
AXA XL’s Mahil emphasised the power of internal and external ESG/sustainability networks in embedding ESG in a company’s culture as well as setting clear KPIs and metrics to create management accountability. The panellists also pointed out that many brokers may already be implementing ESG without labelling that way.
“We are not starting from zero, as most brokers offer employee health plans, for example – they just haven’t branded these kinds of activities as ESG or set formal KPIs around them,” Srivastava said.
“When it comes to climate action or carbon footprint, which forms the baseline of climate action, many broking organisations have not started yet but are curious about how they go about it.”
According to Aviva, 27% of UK brokers are now actively implementing Net Zero plans compared to 17% in 2022; an additional 31% of brokers have developed a Net Zero plan, but have yet to take action; and 97% say they’re actively interested in helping to make their – and their clients’ – businesses more sustainable.
Building the business case for ESG
“One of the main reasons for the lack of action so far is the competency gap,” Srivastava said. “Brokers need a real understanding of the business case for investing into carbon management or other ESG initiatives, and what they’re going to get out of it. That’s what we’ve tried to solve with the ESG Guide.”
He identified three key business cases for adopting ESG; the first being the need to respond to stakeholder pressure from shareholders, board members, investors and customers on climate action.
“Various studies highlight that buying behaviour is shifting towards more sustainable firms, products and services – so to capture future market share, brokers need to integrate ESG into their products and services, as well as internally,” Srivastava said.
A second business case is that creating an inclusive, supportive culture improves employee retention and productivity, driving innovation and profitability.
A third is the long-term cost efficiencies to be gained by initiatives reducing energy consumption and waste, for example, which can aggregate into significant savings over multiple offices or years.
One of the biggest challenges for brokers going forward – and one of the reasons the broking sector is arguably somewhat behind insurers on ESG – is that they must navigate the transition to more sustainable practices while continuing to fulfil their core duty of obtaining the best coverage for the insured at the best price.
According to Srivastava, communication is going to be key. However, brokers may still be some way from actively engaging with customers on sustainability as product stewardship didn’t feature at all in the results of Weightmans’ stakeholder consultations during the development of the Guide, he explained.
“We’re not there yet,” Srivastava said. “But I believe as brokers advance the ESG agenda, they may move to a more proactive approach focusing on stewardship and contributing to the development of ESG-inclined products.”