ESG a way of life for industry award winner AIA Australia

ANZIIF 2024 Life Insurer of the Year AIA Australia was recognised for its impressive environmental, social and governance (ESG) record, practices and policies.

Among a variety of business accomplishments, the organisation was singled out for its Vitality program, which equips members with tools to understand their health and wellbeing; its people development program, which helps promote motivated staff up through the ranks with the assistance of mentors and coaches; and its environmental policy.

AIA’s leadership in the ESG space reflects the industry’s continuing efforts in the space. ESG and life insurance have long been intertwined, says Christine Cupitt, CEO of the Council of Australian Life Insurers.

“Our industry puts people at the heart of everything we do,” she says. “After all, we’re in the business of giving Australians peace of mind when they’re making important decisions.

“Australia’s life insurers are passionate about innovating and tailoring their products and services to meet the needs of the millions of customers they serve every day.

“This includes new retirement products that help give people a more reliable and stable income when they retire, and wellness and recovery programs that support their health during a claim.” 

Damien Mu, CEO and managing director, of AIA Australia believes that large organisations have a responsibility to give back to the communities in which they operate.

“As an insurer and a good corporate citizen, we want to make a difference through initiatives, partnerships and actions that have a positive environmental impact, so we can keep our communities healthier. This is a great example of shared value — it’s good for our customers, it’s good for business, and it benefits society more broadly.”

Why ESG makes good business sense

The size and reach of life insurers put them in an enviable position to influence outcomes on a broad scale.

“A few years ago, we released a report that highlighted the many linkages that exist between our health and the health of the environment — for example, the impact that climate change and air pollution have on the increasing prevalence of non-communicable diseases such as respiratory illnesses or mental ill-health,” says Mu.

That report pointed to the fact that any improvement in health and environment would make a positive and measurable difference across society. That’s good for people, and good for business.

It was backed up by similar reports from organisations such as global management consultancy Milliman which, in its paper titled Sustainable/ESG investing in insurance, outlined how and why life insurers must go above and beyond with ESG.

“Recent developments within insurance companies underscore a growing recognition of the intrinsic link between long-term profitability and sustainability considerations,” the Milliman paper says.

“As environmental, social and governance factors increasingly influence investment decisions, it is paramount for industry professionals to understand the evolving dynamics of sustainable investing within the insurance domain.”

The Milliman report references issues such as risk management, client demand, reputation, branding, societal responsibility and core business alignment as reasons why ESG is a vital strategic focus.

ESG is also about investment

As the Milliman report states, investment decisions should ultimately be led by ESG values.

At AIA, Mu says, ESG factors are integrated from the bottom up, forming part of a comprehensive approach to investment decision-making.

“As a large financial services provider, we know we can make a significant ESG impact through ethical investment decisions,” he says.

“ESG is fully integrated into our proprietary investment approach and we are focused on driving sustainable behaviour. Companies that have strong ESG commitments often deliver higher returns and create sustainable value over the long term — this helps us to secure investment income to deliver on the protection needs of our customers.”

Milliman says insurers can have a positive influence on society more broadly through an enormous variety of investment vehicles, including:

• direct equity investments — shares in companies that also have excellent ESG practices
• green bonds — securities designed as capital for sustainable projects
• private equity and venture capital — funds that focus on sustainable start-ups
• real assets — direct investments in assets such as renewable energy projects, sustainable real estate and sustainable agriculture
• infrastructure — investments in sustainable projects such as clean water facilities and public transport networks.

Globally, AIA has also publicly committed to net zero carbon emissions “by setting validated, science-based targets which focus on both our investments and our own operations”, Mu says.

“We have a small carbon footprint in Australia, but we are committed to reducing emissions in our operations through improved energy efficiency and procuring renewable energy. We extend our efforts to reduce the impacts of climate change across our value chain by working with our partners and suppliers.”

People at the centre

Mu argues that life insurers cannot focus solely on customers. To attract and retain the very best staff, the sector must focus on developing its own people.

What success looks like for AIA’s people is as unique as the people themselves, so the business must have numerous people-first policies and practices in place to cover as many bases as possible.

These include:

• an equal opportunity ethos across the organisation, including the right to be treated fairly and have access to the same rewards, resources and opportunities
• employment-related decisions based on merit
• a commitment to diversity, equity and inclusion
• an annual women’s leadership program designed to develop the capability of current and emerging female leaders
• a Reconciliation Action Plan looking at the organisation’s impact on First Nations health and wellbeing, diversity in AIA’s employment and procurement, and developing a better understanding of First Nations culture
• encouraging staff to give back with a day of volunteer leave each year.

“At AIA, our success comes from our people, a talented team of individuals who are driven by our purpose to make a difference in people’s lives,” says Mu.

“All our employees have a part to play in this and wherever they fit in the AIA family, the difference AIA makes starts with them.”

Read about the other Australian award winners