Embracing ESG: How insurers turn ambition into action

Environmental, social and governance (ESG) priorities are reshaping the global economy. In turn, regulation is adding further impetus to the ESG transition, especially in relation to investments, risk and reporting. Beyond compliance, these regulatory changes have significant implications for key aspects of strategic management including product development and investment decisions. This underlines the extent to which strategic ambitions and regulatory expectations on ESG go hand in hand in hand.

While stakeholder and regulatory pressures mean that Europe is at the forefront of this transformation, the Middle East and Africa are also feeling the growing impact.

Insurers in Europe, the Middle East and Africa (EMEA) need to keep pace, from rethinking their role within a fast-evolving economy to defining their level of ESG ambition and embedding ESG in their strategy, culture and operations. Eight out of ten insurers taking part in PwC’s Global Insurance ESG Survey want to incorporate ESG into their strategy in ways that go beyond regulatory requirements.

A similar proportion believe that ESG will have an impact across all their functions, not only underwriting, investments, risk management and reporting, but also claims,tax, human capital, their own operations and sales practice.

The big question is how to turn need into action. ESG is a notoriously vast arena. The complexities are heightened by the crossovers and knock-on impacts between the environmental, social and governance priorities. Even knowing where to begin can therefore be challenging. It’s telling that most of the insurers in our global survey have yet to take significant action on either the social or environmental aspects of ESG. This includes the key step of defining their ambitions.

"When I first looked at the report, I was astonished by how relevant each dimension resonates fully with the Luxembourg insurance ecosystem, either local or cross-border type of companies and even intermediaries. Particularly, the “Be part of the solution” matches perfectly with the way Luxembourg life insurers can provide financing to ESG and sustainable-oriented projects and initiatives or how non-life insurers will provide new innovative insurance products to ensure society can weather as much as possible the effect of climate changes. Coupled with the heavily green-oriented funds industry, no doubt the Luxembourg marketplace and its insurance arm will have its say in the ESG revolution."

Anthony Dault, Insurance Partner

Practical way forward

In this report, we therefore look at how you as an insurer and the industry as a whole can move forward on ESG.

Our primary focus is climate as this is currently likely to have the greatest impact on your strategy and the business model supporting your transition to a net zero economy. But we also cover other environmental goals that might have a significant strategic impact such as biodiversity and the circular economy, along with some of the key social and governance priorities that are shaping stakeholder demands and form a critical element of ESG overall.

Recognising the complexity of ESG, we seek to break down the strategic considerations and operational reconfiguration into manageable components. We begin by exploring how the transition to a green economy is transforming the risk landscape and client demand. We also look at ESG regulatory compliance, putting different regulations into context, highlighting the most complex challenges and outlining the strategic implications. We then drill down into what these strategic and regulatory developments mean for the fundamentals of product design, underwriting, asset management and your own operations. In the subsequent sections, we focus on the functional (especially risk, reporting and tax) and data management overhaul needed to deliver these changes and align them with the parallel digital transformation of your enterprise. We close by reflecting on the outlook ahead.

Start with your ambition

We don’t want to be prescriptive in this report – we recognise that this is a highly diverse industry.

But what comes through strongly from both our analysis and work with clients is the importance of defining your ESG ambitions and how to realise them in line with your purpose and strengths as an organisation. Solely relying on regulation to guide and drive change can only result in a piecemeal and reactive approach.

What’s also clear is that ESG can’t be simply tacked on to existing strategic objectives and operational capabilities. ESG goes to the heart of what stakeholders expect and how your business is judged, and hence how you will conduct business in future. To deliver, ESG needs to be embraced and embedded within your organisation from the inside-out. By making your business more credible and relevant within a changing world, the result would be a virtuous circle of purpose, opportunity and sustainable growth. If you simply rely on surface change, you not only risk organisational tensions, but could also fail to live up to your promises and risk being called out for ‘greenwashing'.

At PwC, we’re putting ESG and the net zero transition at the forefront of our priorities by committing to net zero by 2030, globally. We’re also looking at all our actions through an ESG lens and supporting our clients around the globe during this critical transition. This report can play a part in this journey by bringing ESG strategy and regulation into context and showing how to take action in an efficient and effective way.

I hope you find this report useful and thought-provoking. I would like to thank colleagues from around EMEA for their contributions. If you would like to discuss any of the issues we raise or know more about how your business can embrace and embed ESG, please get in touch with us.

"Luxembourg plays a major role in the European insurance ecosystem, particularly in life but increasingly also in non-life and reinsurance. Our active contribution to this PwC White Paper "Embracing ESG: How insurers turn ambition into action" draws from our experience in working with Luxembourg-based insurance clients. We believe that this report reflects well the opportunities and challenges that the ESG presents to your businesses, and sets out approaches that go beyond narrow regulatory compliance to embedding ESG perspectives in corporate strategy in a way that can deliver strong value creation through better stakeholder alignment."

Andrew McDowell, Partner, Strategy&

Contact us

Matt Moran

Insurance Leader, PwC Luxembourg

Tel: +352 49 48 48 2071

Andrew McDowell

Partner, Strategy& Luxembourg

Tel: +352 49 48 48 2034

Christoph Schellhas

Partner, Sustainable Finance Insurance, PwC Germany

Tel: +49 69 9585-6489

Anthony Dault

Insurance Partner, PwC Luxembourg

Tel: +352 49 48 48 2380

Frédéric Vonner

Advisory Partner, Sustainable Finance & Sustainability Leader, PwC Luxembourg

Tel: +352 49 48 48 4173

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