When I first started working in the insurance industry, one of my first meetings on risk management was with a well-respected senior director. When I asked his view on the purpose of risk management, he argued it was about “the management of external perceptions”.


Thankfully the financial services industry has moved on from this viewpoint, but I was reminded of this statement when I first read of the most recent greenwashing scandals to emerge from the investment industry. 

The danger for insurers is their investment managers don’t take ESG as seriously as they would like. The recent raiding of DWS sends a strong signal about the risks of misleading investors, and the similarities between greenwashing and mis-selling – something still within insurers’ corporate memory. 

What these scandals teach us is that ESG investing is experiencing an accelerated adolescence and hasn’t yet reached the maturity we’d have hoped. Adolescence can be a confusing time of ambiguity and change, resulting in the occasional emotional outburst. 

ESG is no different – a confusing, ambiguous term covering a whole range of diverse components which themselves can stir up different emotions in insurance professionals. 

While some say it’s time to retire the term as it makes things more confusing, I think it can be argued the term’s use accurately reflects the reality – that managing ESG and sustainability considerations is complex, and organisations need a joined-up approach to the interdependencies and interrelationships between the factors. 

How then should insurers approach their investments? Given this complexity, insurers need to be in active engagement with those managing assets on their behalf in relation to ESG and sustainability factors. 

They need to ensure they have clearly communicated their desired approach to climate and sustainability, and need to be increasingly comfortable that their investment managers’ philosophy and approach to ESG investing aligns to their own philosophy and sustainability strategy, and that this is reflected in investment mandates. Increasingly, this will include how investment managers run and operate their own organisations too. Finally, insurers need to recognise that the investment perspective is an input – they need to think about investments from their unique perspective as insurers, and consideration can’t simply be outsourced to investment managers.

“How can the insurance industry guard against greenwashing?”

This will require a two-way dialogue, and increased disclosure and transparency. In mandating disclosure, however, it’s important to ensure we avoid regulations and regulatory frameworks that make companies too risk averse to act or disclose their views for fear of getting sued. Investment managers and insurers need to recognise that reputational risk is two-sided, and companies will be judged wanting both for a lack of ambition as well as for trying to please everyone. 

How can the insurance industry guard against greenwashing more generally? While there is a need for increased transparency and consistency, insurers shouldn’t see disclosure as an end in itself, but the output that demonstrates the quality of their work on climate change and ESG. This requires insurers to:

  • Be clear on their ambitions on ESG, and their areas of focus.
  • Understand their impact on ESG factors.
  • Understand the risks and opportunities, including using scenarios to quantify their unique exposures.
  • Develop a focused sustainability strategy, which recognises the need for an integrated approach to ESG, both across its components and across their organisation, to demonstrate a clear linkage to their organisation’s purpose and strategy. 
  • Ultimately what will differentiate firms and sectors, and avoid the perception of greenwashing, is what they do in practice – for example, having a well thought through transition plan, which they build up a strong track record of delivering on through tangible actions. 

It’s important that the complexity of ESG isn’t used as an excuse not to tackle the key challenges that exist within organisations and within the wider world, such as climate change and equity, diversity and inclusion. This is ultimately how insurers and the insurance industry will make a difference in the world on ESG. We need to resist waiting for a perfect framework, set of definitions or regulations, when action is what the world needs.

Adolescence has a value – if what emerges on the other side is more sophisticated, more capable of effective communication, more able to deal with ambiguity and complexity and more capable of enabling good decision making. 

Hopefully by approaching ESG investments and ESG and sustainability in this way, insurers can seek to avoid greenwashing becoming a new mis-selling scandal. I hope the industry can show their stakeholders that their approach to ESG is more than “the management of external perceptions”, and make a difference to the world by engaging with the risks and opportunities that climate change and sustainability considerations bring.

The inaugural ESG Insurer Awards will take place on 12 July at The Honourable Artillery Company (HAC), City Road, to celebrate the leading companies and personalities of our marketplace that are championing progress in the ESG space.

Guests will enjoy a welcoming champagne reception, a three-course meal, comfortable banquet-style seating and complimentary bar at the historic Georgian house set in a five-acre garden hidden away in the heart of London. There is still time to book a table – contact Spencer.Halladey@wbmediagroup.com or andy.stone@wbmediagroup.com for more details.



Justin Elks is partner and head of risk consulting at Crowe UK. He specialises in governance, risk and resilience, and ESG and climate, helping to build purpose-led, long-term sustainable businesses that are able to thrive in complex, ambiguous and uncertain business and regulatory environments.