More than half of risk managers are significantly involved in their organization’s environmental, social and governance (ESG) efforts, but 77% believe they should take an active or more active role in ESG strategy and initiatives, according to a survey of risk managers by WTW.
Of the 312 risk managers who responded from companies around the world, 74% said an improved ESG score is a core focus for their business. But while a majority of risk managers said their organizations have ESG goals, only 17% have documented targets with clear milestones for ESG risks.
ESG priorities also rank lower in North American than in other regions. Overall, 24% of US companies have set ESG risk management targets with clear milestones.
“Many organizations equate ESG risk with reputational risk, but to manage ESG effectively it must be broken down into measured, manageable risks, and a risk management process established around them,” said Lisa Lipuma, director of enterprise risk consulting in North America at WTW. “Companies should first take a ground-up look at what ESG is, then identify the specific risks they face through a risk-mapping exercise. Finally, they should assess the impact, likelihood, and velocity of each risk before bringing them into the enterprise risk management framework.”
Three quarters of respondents have taken actions to address environmental liability and climate risks. However, many have done so without adopting specific goals or key performance indicators.
Risk management and governance intersect most frequently in due diligence linked to risk advisor, broker, and insurance-carrier appointments and reviews. Two thirds of risk manager respondents say they are extensively involved in these areas, compared with around 40% that carry out similar work related to suppliers and investment opportunities. Risk managers identified key social-risk-management priorities as data privacy and cyber risk (97%), workplace safety (88%), product liability (79%), and employment practice liability (78%).
Related: ESG Will Increasingly Influence Insurers’ Strategies: Fitch Ratings
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