What is Environmental, Social, and Governance (ESG)?
by StaffIASA
Marketing Communications,—
Environmental, Social, and Governance (ESG) is a risk profile that adds layers of risk considerations on top of financial ones to determine the entire scale of risk. ESG takes into account an organization’s environmental, social, and governance preparedness and structure to determine its risk-level – how well-prepared they are against losses, such as work-related accidents, reputational damage, government fines, and more. Insurers consider a number of risk factors within the ESG framework, including insured losses, workforce risks, fine payments, future controversies, financial outlook, sector events, and more.
Insurers then evaluate organizational ESG risk profiles to determine coverage options, premiums, and even to decide if coverage can be offered. Insurance companies evaluate early warning indicators to predict if an organization has a propensity for future harmful and financial losses. The higher an organization performs in terms of ESG of preparedness in their evaluation, the likelihood of experiencing losses declines. It’s worth organizations to invest in its ESG infrastructure and preparedness now to minimize future liabilities.