Getting forward of rules curve – managing principal’s recommendation on “climate-first” ESG reporting

Recent climate the world over has led to the insurance coverage business highlighting local weather dangers as one that can carry some of the – if not the outright most – weight as we transfer in the direction of the longer term. In line with this, there have been plenty of calls to motion for higher environmental, social, and governance (ESG) reporting, particularly as regards to climate-driven initiatives.

As it’s a reasonably new space that’s nonetheless being studied and developed, there are occasions when some companies really feel misplaced within the haze, which might finally result in the issue of greenwashing. In mild of this, Capco, a administration consultancy, has unveiled a new proposition with AXA to supply enhanced data-driven local weather danger evaluation and reporting within the hopes of guiding each insurers and their purchasers to raised ESG reporting requirements.

In dialog with Insurance Business Risk Management channel, Capco managing principal Alan Au (pictured) offered background on how this collaboration happened.

“While Capco currently provides climate advisory services to clients, we recognise that sourcing high-quality and reliable climate risk data in the region is one of the key challenges facing financial institutions and listed companies moving forwards, as regulators increasingly move towards requiring more granular climate-related disclosures,” Au stated. “In light of this, after connecting with our AXA partners initially, we collaborated to develop a solution offering combining Capco’s expertise in climate disclosure and risk advisory with AXA’s robust climate risk models backed by high-quality data.”

This new local weather proposition, Au stated, affords each listed corporations and monetary establishments an end-to-end means for local weather danger advisory, with the required flexibility relying on the place companies are of their local weather danger journey.

“The proposition can support companies ranging from climate disclosure advisory to enable compliance with relevant regulators, to more advanced climate risk assessment, integration and strategy advisory across companies’ portfolios,” Au stated.

Where are we on ESG reporting in Asia?

As somebody who’s within the thick of discussions and the continued improvement of requirements for correct ESG reporting, Au stated that whereas there are some who’ve a broad thought of find out how to proceed, there are nonetheless those that are undeveloped relating to their reporting.

“Focusing specifically on climate-related disclosures, which is the scope of this partnership’s climate proposition, companies’ disclosures in the region are currently mixed with pioneers disclosing quantitative information where possible. For example, some international financial institutions with significant regional presence disclose climate-related metrics and targets in line with EU regulations,” Au stated.

“On the other hand, while many smaller local and regional financial institutions in the region have been gradually enhancing the quality of their mandatory ESG reports – for a decade, in the case of Hong Kong-listed companies – their climate-related disclosures are in initial stages of development and are mostly qualitative to meet regulatory requirements from HKMA (Hong Kong Monetary Authority), HKSFC (Hong Kong Securities and Futures Commission), HKEX (Hong Kong Stock Exchanged) and MAS (Monetary Authority of Singapore), for example,” he stated.

That stated, wherever corporations are on the spectrum, Au stated that what’s necessary is getting forward of the curve, particularly as expectations for extra granular and quantitative regulatory disclosures sooner or later rise. Companies can do that by way of sturdy, data-driven options, together with the one supplied by way of Capco’s partnership with AXA.

“One of the common greenwashing pitfalls occurs when they make ambitious and publicly-stated ESG goals without a credible or robust plan in place to achieve them,” Au stated. “To avoid this pitfall, companies must back up their commitments with a clear action plan supported by reliable data to track their ESG performance. Having high-quality data not only helps companies monitor and disclose their progress to relevant stakeholders, but also provides a robust foundation to adapt to the dynamic regulatory landscape.”

On the subject of commitments that don’t get backed up, Au additionally spoke briefly in regards to the current mass exodus from the Net-Zero Insurance Alliance, together with its potential results on ESG reporting. Au echoed a related sentiment from an Asia ESG chief, saying that insurers’ dedication to their very own frameworks remains to be the necessary facet to contemplate over crumbling alliances.

“Even though there have been withdrawals from the alliance, the insurers who have withdrawn are all still committed to net-zero goals using their own frameworks. The departures may slow down collaborative efforts in reaching net zero across the industry, but it does not stop insurers in working towards their net zero targets,” he stated.

Better disclosures to lead to give attention to precise efficiency

If there’s one factor Au is bound of, it’s that the necessity for ESG reporting, particularly regarding local weather, will likely be extra prevalent as a response to local weather change and its results. Citing current developments in Asia, significantly in Singapore and Hong Kong, Au stated that insurers and their purchasers can anticipate heavier scrutiny round ESG reporting.

“With the ISSB (International Sustainability Standards Board) standards being launched this year expected to be aligned with TCFD (Task Force on Climate-Related Financial Disclosures), and regulators across the region indicating they will align with ISSB, we foresee a strong trend of standardisation of ESG disclosures. This means the global trend of ‘climate-first’ ESG reporting will continue to be implemented in APAC and there will be increasing scrutiny on the reliability and granularity of disclosures, including the quantification of financial implications of climate-related risks and opportunities,” he stated.

Improvement on the disclosures entrance will result in a renewed give attention to the precise efficiency of the organisations, Au stated, particularly when weighed in opposition to their commitments to addressing local weather change and their administration of local weather dangers.

“While our partnership proposition is not limited to insurers, we advise companies including insurers to take a comprehensive approach to climate risk strategy – from preparing themselves for the upcoming changes by identifying high quality data sources to improve the reliability of their climate risk assessments, devising informed climate risk and opportunity strategies to address priority areas identified by these assessments, to planning how to embed ESG capability and practices both within their own organisation and across external stakeholders,” Au stated.

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