Brishni Mukhopadhyay is Western Asset’s ESG Product Specialist and works with a range of clients across geographies to help integrate ESG (environmental, social and governance) considerations and design mandates to meet their sustainable and investment objectives.
María Sánchez is part of the Sustainability Indices Product Management team at S&P DJI, which enables market participants, including insurance companies, to align their products, investments, and decision-making processes with their value to achieve sustainable results and promote positive change.
S&P DJI: Are sustainability considerations important for insurers to consider?
Brishni: As long-term investors with business models centered around the assessment and pricing of risk, ESG considerations are paramount for
insurers to integrate holistically into their strategy, underwriting, investments, and relationships with stakeholders. Rapid acceleration in the frequency of natural disasters has rightfully increased the focus of the insurance sector
on climate risks, but there are additional areas of ESG risk that insurers need to assess and manage. These include product safety and cybersecurity, health and injury risks, shifts in consumer sentiment, human rights and supply chain management, as well as corporate governance and transparency.
Additionally, as ESG regulations on companies in the financial sector expand across the globe, insurance companies will need to navigate a complex set of requirements across the states and regions in which they operate.
These requirements, particularly for publicly traded insurance companies, are likely to include broader and more detailed disclosures, augmentation of climate modeling capabilities and more formalized oversight by boards and senior management.
It is therefore imperative that insurers analyze and understand how ESG risks can impact the policies they are underwriting and the issuers in their portfolios, and to strategically position themselves to benefit from ESG-related megatrends across their markets.