Risk managers consider their role in sustainability challenge

The risk management sector could play a vital role in helping senior management meet their sustainability goals and obligations. However, this will require greater cooperation between risk managers, insurers and governments, as well as better use of technology and more consistency around sustainability data.

These were the main findings from a panel debate on sustainability at the Pan-Asia Risk & Insurance Management Association (Parima) conference.

The session, titled ‘From Greenwashing to Net Zero – the biggest risk?’, explored the role of risk managers in the sustainability challenge.

“Climate change is a real thing and we all need to adapt but we need to clarify what exactly our organisations do next,” said Steve Tunstall, Parima director general.

“The challenge from a risk management perspective is that there is a bewildering set of guidelines and forecasts,” he added. “Carbon offset protocols and pricing are just a simple example. The range of pricing today varies from under $1 per tonne of CO2 right up to the outlier case in Sweden where the rate is $128 per tonne.”

Tunstall also referred to the data problem within the ESG market – both the availability of data and the lack of standard definitions and protocols. “If you can’t measure it, you can’t manage it. Organisations need to make effective strategic decisions but they need trust and consistency in both measurement and governance. We don’t seem to be far enough on this journey yet,” said Tunstall.

Another challenge for risk managers is finding a way to incorporate sustainability risks within their current risk frameworks, said Suresh Sundararajan, managing director and group head, global corporate services, at Singapore-based food and agribusiness Olam.

“How do you bring these new risks into your traditional risk framework and find a way to measure the frequency and impact of those risks?” he asked.

It is possible to link sustainability to other risks such as reputation or commodity prices, said Sundararajan. But risk managers will also need to look at other organisations within their industries for tips and also make greater use of technology, he added. For example, Olam has an app that allows users to track their carbon footprint on a daily basis.

Right now, sustainability and climate change are more of a risk than an opportunity, conceded Hsien-Hsien Lei, CEO of the American Chamber of Commerce in Singapore. However, greater cooperation between companies and governments will help.

Shareholders will also play a role, she said. “Shareholders are pushing companies to adopt sustainability but are they prepared to accept lower rates of growth?”

This will be especially true in the developing world where there may be some resentment at the imposition of sustainability targets, said Lei. “Incentives and disincentives for companies can be hard to swallow but we will need them,” she added.

Finally, David Jacob, CEO, Marsh Asia, outlined the role of insurers in the sustainability challenge. “We are seeing an increasing use of captives, parametrics and carbon-offset products as a different source of capital,” he said. “There are also better D&O rates for companies with superior ESG frameworks, so you can see how insurers are trying to encourage better behaviour from companies in sustainability.”

Source: www.commercialriskonline.com/risk-managers-consider-their-role-in-sustainability-challenge