Oxbow’s Versi: Greenwashing poses threat of “legal ramifications” for industry

Oxbow Partners’ head of ESG, Miqdaad Versi, has warned of the legal ramifications that could arise if a company is accused of greenwashing in relation to statements made about ESG initiatives.

In an interview with The Insurer TV, Versi said: “There is definitely a risk in some jurisdictions that if you say certain things in a report which lead to negative financial returns on someone else because they were relying on that, there can be legal ramifications.

“Some of the people we’ve spoken to were worried about legal ramifications and that’s why they haven’t disclosed as much,” he explained. “They didn’t want to say as much publicly, because they thought, ‘if we say this and someone relies on it and then they sue us, that’s a challenge’.”

Versi spoke of the importance of “appropriate caveats and controls” for companies when disclosing details around their ESG practices. Regulatory reporting, for example, would hold companies to account in terms of their ESG procedures.

However, he said the industry needs to be mindful not to hold back too much on what they disclose.

“We need to be careful here,” he said. “We shouldn’t be holding back disclosures for this risk. What we should be doing is making sure there are appropriate controls around these disclosures, making sure that those disclosures have the appropriate caveats around them,” he added.

Similarly, he pointed out that adding granularity to reporting could improve a company’s ESG reputation.

“When it comes to greenwashing, similarly with disclosures generally, if you start disclosing more and you do so in a way that people can see and is fair and justified, I don’t think there is going to be as much risk as people think there is,” Versi said.

Litigation threat

However, a link between a company’s ESG disclosures and litigation exposure is beginning to form.

Only recently, the Bank of England warned that insurers should look out for exposures to litigation costs as regulators increase scrutiny on ESG reporting, which could result in losses from lawsuits.

The remarks, made by the central bank’s technical head of division for general insurance Stefan Claus, point to results from a recent climate stress test which underscored the market’s exposure to litigation risk.

And during a fireside chat at S&P’s annual insurance conference in the US, Chubb chairman and CEO Evan Greenberg expressed concerns over the growing connection between insurance companies overpromising on climate-related ESG goals and legal issues around greenwashing.

“I’m concerned when it comes to ESG,” Greenberg said. “Especially around climate change right now, and directors’ and officers’ liability.”

Regulatory standardisation in Bermuda

During the interview, Versi pointed to the leading role the Bermuda Monetary Authority (BMA) is playing in driving ESG adoption for (re)insurance companies in the region. He said this “very positive” relationship is accelerating progress on disclosures.

“There is definitely the opportunity for the BMA to play an important role in coalescing and moving things forward, but in a way that brings everyone together – that’s definitely a possibility. My understanding is that there is already going to be some really positive action on disclosures,” Versi said.

The BMA last year renewed its focus on ESG by creating a subject matter expert team focusing on innovation and climate change, designed to help the members of its jurisdiction in setting out business model proposals to address climate change risk and the associated protection gap.

ESG in Bermuda

The Insurer TV spoke to Versi following the Bermuda Climate Summit, where together with the Bermuda Business Development Agency, Oxbow Partners published a study on ESG in Bermuda.

The report, the first of its kind focusing on ESG initiatives on the island, said respondents were concerned about the lack of reliable ESG data for reinsurers, particularly for tracking Scope 2 and Scope 3 emissions, as well as the adoption of hard exclusions.

The study found many Bermudian firms are still in the early stages of their ESG journey, with only 32 percent having currently sourced any specific ESG underwriting data, noting a limited understanding at present as to what to do with any data obtained.

But this is expected to change. Ninety-two percent of those that don’t currently factor ESG into underwriting practices said they plan to do so in the future while close to half (47 percent) of respondents have now integrated ESG into their investment strategies. Of those that haven’t, 90 percent are planning to do so in the future.

When asked what Bermudian (re)insurers should be looking to achieve over the next year, Versi pointed to different approaches depending on where they are in the ESG adoption process.

“For the majority, who are in the early stages of their development, it really depends on where they want to focus,” he said.

“The whole point about ESG is not about everyone doing everything. It’s about doing – how can you improve your ESG credentials overall. For some of these people, that involves greater disclosure, more transparency, making sure that people are aware of what they’re doing,” he added.

Watch the 10-minute interview with Oxbow Partners’ Miqdaad Versi to hear more about:

  • What Bermuda’s (re)insurers should be looking to achieve over the next 12 months with their ESG strategies
  • How underwriters will address the data challenge in embracing ESG in underwriting
  • How the BMA will likely lead the way when it comes to a standardised regulatory approach to ESG
  • What will happen to those (re)insurers that don’t invest in embedding ESG across their businesses