Intelligence: what does the future hold for ESG chief officers?

Sustainability officer roles are not a new addition to the board for many of the larger insurers, but for smaller businesses, that are only now starting to recruit head of ESG, these roles tend to be less complex than for larger businesses.

Greg Lowe, Director in the sustainable finance team at Deloitte, explains: “Where larger insurers are concerned, there are now often regional leads given the complexity and scope of the topic. For regional leads or sustainability leads at smaller insurers, the roles are typically less technically complex. Many of those are recruited from operational sustainability roles, with a focus on energy efficiency and reporting. Beyond the roles within a sustainability function, for corporate and speciality insurers in particular, many risk functions are appointing roles specific to climate. Climate isn’t always the full-time focus of the role, but it’s becoming more commonplace for it to be a full-time role”.

AXA XL, for example, has a sustainability team in place for “about 10 years” according to CEO for UK and Lloyd’s at the firm Sean McGovern. McGovern explains: “We are really focused on how we – as a business – try to ensure that we act responsibly and are sensitive to the ESG considerations. This is not a new journey for us, but our thinking has evolved and matured as time has gone by”.

He adds that at AXA XL sustainability is a “core premise” of the business, and says: “We have a global sustainability team that drives our sustainability agenda. From an ESG point of view, and within the UK, we have a small ESG team, which is really there to pull it all together at country level, but is also particularly focused around how we bring value to our clients in helping them with their own ESG practice”.

Some larger brokers also split their ESG and sustainability roles. Richard Dudley, Global Head of Climate Stategy at Aon, looks specifically at climate change and at how the industry should be supporting decarbonisation and increasing resilience to the existing effects of climate change, as well as how to develop new products and services.

Leslie Follmer, Head of Investor Relations and ESG at Aon, is globally responsible for how Aon “spends its money, for example, the cost of how we run our operations, the carbon footprint of our real estate, the travel and the entertainment policy we have for all our employees around the world, and how we manage our supply chain”, but also has an eye on ESG on commercial side and is “responsible for looking at ESG more broadly”, according to Dudley. Dudley explains: “It sounds a bit of a mish-mash, but it actually works quite well in a large organisation because there are so many aspects of this”.

For the rest of the industry Roger Jackson, UK Partner and Insurance ESG leader at KPMG, says he has not seen many firms “where they’ve got a sustainability head and chief ESG officer”. He explains that those that focus more on sustainability tend to have head of sustainability roles and those more focused on S and G aspects of ESG have chief ESG officers, adding that head of sustainability often is there to signal to stakeholders “that sustainability is a big issue for them”.

For example, LV, Marsh and Zurich only have heads of sustainability, Allianz has a Chief Sustainability Officer and Ageas has a Head of ESG. Other companies, including Aviva, Gallagher or Markerstudy for example, do not have a dedicated ESG/sustainability officer and instead have people whose roles include responsibility for company’s sustainability agenda.

In terms of background for these roles, brokers and insurers take different approaches. Dudley says: “If you look at Marsh it has got people in similar roles to me who have also come from [within] the business. If you look at EY, its global head of sustainability used to run its UK operations, for example".

He expects that people with sustainability roles at “major insurance companies like Allianz or Aviva” to have a sustainability background or corporate social responsibility background “because they need to consider every aspect of how that company runs, and not just how it interacts with its clients”.

However, Jackson has seen a mix of people from within the business, and with sustainability backgrounds appointed into the role at insurance companies. He says: “It depends where the focus of the firm is. If the focus is more on sustainability, you get head of sustainability and that tends to be someone with some expertise in that role. But they still need that leadership quality as well”.

Where the role is more ESG focused, it tends to be filled with people with business background or from within organisation.

This includes Allianz, which hired its ESG experts from within the organisation, according to Julie Harrison, Chief HR Officer at Allianz Holdings. Harrison says: “We take subject matter experts and support the development of their sustainability expertise, and we have found this approach works well. It means that ESG can be integrated into existing business practices, making it more successful”.

Group Head of Sustainability at Zurich, Linda Freiner, has come from a business background “having worked in a typically corporate roles in both finance and consulting”. Prior to taking on the role, Freiner took a fellowship with World Economic Forum to try and understand “the wider role of business in society”.

She says: “People that you see in these roles today, they often come with this expertise, having worked in the company for a long time, knowing the company quite well. And therefore they can see in terms of how ESG integrates, where is it, how we run this, and how we run a change management process because it’s really about transforming the company. There’s a next generation coming up who have actually studied sustainability in business school and who are looking at this topic specifically from different angles that are also coming into the workforce. But the sustainability leaders that you see today, they come with the stakeholder engagement, the knowledge of the company, and really wanting to drive change experience”.

When it comes to the resources that heads of ESG are equipped with, this also varies from company to company.

According to Johansson, some have established dedicated sustainability or ESG teams, with two to three experienced managers from the business, while  “others are leaner and see the sustainability head working more transversally with existing colleagues/resources across the organisation”.

For BMS Group, there are many facets to ESG and a number of areas within the company are already focused on meeting set targets. BMS’ Group Head of Environmental and Social Responsibility Neil Prior, explains: “We have, for example, embedded the governance framework in the business for many years. Functions such as compliance, human resources, diversity and inclusion, training and development, and staff wellbeing are well advanced. However, there is always more work to be done. Companies must invest in the knowledge and skills required to effectively execute the management of change. For this to be done within a planned time frame, resources, which are both human and financial must be made available on the scale needed to fulfil ambitions".

At AXA XL, the Head of Sustainability and Head of ESG have dedicated teams to help them achieve their goals. McGovern says: “Suzanne [Scatliffe, global sustainability director] has a team of six people and she’s given a budget. The sustainability team oversee our charitable giving and working with local charity committees. We try to coordinate that as best we can to ensure that our activity is very much aligned with our sustainability strategy. We look to partner with charities that support the pillars of our sustainability strategy. On the ESG side, it’s a team of three people supported by an established ESG Forum, which is there to drive the ESG strategy and open to all colleagues across the organisation who are keen to play a part in driving an ESG agenda. It’s really tapping into the energy and enthusiasm of that group. It’s a small team of resources and then [it’s really about] setting it up in the organisation to make this an organisational priority rather than just the priority of two or three people”.

Freiner also expresses that a sustainability team should not consist of 30 people and instead should “stay small and agile”. She explains: “We assign the responsibilities depending on the role that we have. That includes strategy, supporting implementation, reporting and stakeholder engagement. We need to hire people in the functions in the business where work is happening. The danger, if you have big sustainability functions, is that other functions and the business will think ‘they do sustainability’, so it never gets fully integrated into the company”.