The new CSR agenda for insurers

Vol: 45 Issue: 1 | March 2022

‘Over the last decade or so, CSR has changed from being primarily focused on community-based activities or philanthropy to having a much broader meaning,’ says Sarah Kelly, who has responsibility for CSR at MetLife Australia. ‘CSR can include community support; diversity, equity and inclusion initiatives; environmental considerations; and employee engagement and wellbeing. At MetLife, these all sit under the banner of sustainability.’

Now a preferred umbrella term both inside and outside the insurance industry, sustainability is also playing a more significant role within organisations.

‘In the past, corporate responsibility was generally treated as a purely operational issue with an adjunct or specific standalone function,’ says Rob Siveter, Suncorp New Zealand’s sustainability manager. ‘Now, it’s being integrated as a critical component of business strategy.’

In addition, a growing awareness of social and environmental issues is shifting both customer expectations around companies’ social license to operate and regulators’ requirements.

‘There are also many internal drivers, but, from our perspective, the biggest is that sustainability makes good business sense,’ continues Siveter. ‘It creates opportunities for new products and services, better risk management and, ultimately, allows us to meet our purpose of building futures and protecting what matters.’

For example, Vero — which is a subsidiary of the Suncorp Group — is collaborating with suppliers to create a code of practice spanning a variety of environmental and social impacts. The company is on track to meet its target of reducing carbon emissions in corporate operations by 51 per cent by 2030. It has committed to using 100 per cent renewable energy sources to power operations by 2025 and is in the process of transitioning its car fleet 
to hybrid vehicles. 

‘We’re also committed to making our products available to a wider section of society and supporting the resilience of customers experiencing financial vulnerability,’ says Siveter. This includes a fund of up to NZ$10 million to help customers who are facing financial hardship maintain insurance policies, and Drive; a scheme that seeks to provide affordable car insurance to Kiwis on limited incomes in partnership with social lender Good Shepherd. 

Siveter sees no conflict between insurers’ commercial and social responsibilities. 

‘If we don’t serve our communities, our customers won’t support us over the long term,’ he says. ‘Conversely, if we don’t maintain a level of commercial viability, we won’t be able to support our customers or provide employment and wider benefits to our economy.’

Corporate social responsibility: a question of purpose

Ainslie Malcolm, corporate social responsibility manager at Auckland-based AA Insurance, sees many businesses rethinking their purpose and what they stand for. 

‘As environmental and societal challenges continue to increase, stakeholders are using their voices and their wallets to support investments, products and services that create better outcomes for all people and the planet,’ she says.

AA Insurance is at the start of its sustainability journey and Malcolm admits there’s a long way to go. However, the company has already moved into a five Green Star-rated building, transitioned over 90 per cent of its fleet to hybrid vehicles, started measuring carbon emissions and set reduction goals aligned with science-based targets. 

‘Recently, we were delighted to donate NZ$70,000 to organisations and charities that matter the most to our employees,’ says Malcolm.

Malcolm describes AA Insurance’s CSR priorities as responding quickly and effectively to customers’ needs, caring for employees and communities, and helping the environment.
‘At the heart of these three areas is our foundational approach of doing the right thing,’ she says. ‘For example, reviewing and adjusting our approach to service for customers experiencing vulnerabilities is based on the right thing to do, rather than meeting compliance.’

Ramana James, IAG executive general manager, safer communities, adds that an organisation’s views and actions on social issues are increasingly influential in terms of attracting and retaining employees. He also notes significant interest from investors and analysts in how organisations manage social and environmental issues as material risks to the business and disclose and report on their commitments. 

‘There is a growing call for reporting that goes beyond short-term financials to demonstrate performance across the breadth of environmental, social and governance [ESG] issues that are increasingly impacting an organisation’s bottom line,’ he says. 

‘Regulators are also outlining higher expectations on ESG issues, including APRA’s recently finalised prudential standard for managing the financial risks of climate change, and the New Zealand Government’s move to become the first in the world to announce mandatory climate risk reporting for financial institutions.’

Across the industry, climate change is a priority for businesses and stakeholders. IAG, for example, focuses on risk assessment, greenhouse gas reduction, adaptation and natural hazard resilience, and how the company can best partner with the wider community for maximum impact.

James says the company invests heavily in climate-change science and is one of the few insurers in the world with a specialist, in-house team of climate scientists and engineers. 
‘We share their expertise and our claims data to help inform climate policy,’ he says. ‘Together with the US-based National Center for Atmospheric Research, we have released two editions of the Severe Weather in a Changing Climate report to advocate for changes in disaster recovery and resilience planning.’ 

IAG’s own climate targets include net zero emissions by 2050, with a 50 per cent reduction in emissions by 2030; to cease underwriting entities predominantly in the business of extracting fossil fuels and power generation from fossil fuels by 2023; and achieve net zero investment portfolio emissions by 2050.

CSR priorities for insurers

According to James, another key priority for the insurance industry — and the financial services sector more broadly — is accountability, transparency and consistency in how organisations report on their action on issues impacting their communities. 

‘IAG continues to play a leadership role in evolving ESG reporting standards. Alongside other global insurers, we worked with the United Nations Environment Programme Finance Initiative’s Principles for Sustainable Insurance on the first comprehensive guidance for the insurance industry to identify and disclose the impact of climate change on its businesses. We were also a founding member of the Australian Sustainable Finance Institute (ASFI), which is based on the belief that prioritising human wellbeing, social equity and protection of our environment is crucial to achieving a strong, sustainable and resilient economy.’

MetLife’s Sarah Kelly believes that the best CSR work is anchored in a business and plays to its strengths, expertise and purpose. 

‘MetLife is a purpose-driven organisation, so building a more confident future for customers, partners, employees and the community is core to our business,’ she says. ‘Our three prioritised areas — Financial Health, Mental Health, and Environment and Community — enable us to focus our efforts in areas that are meaningful and relevant for our customers and employees.’

MetLife has a longstanding partnership with Habitat for Humanity, which aims to provide safe and secure housing for vulnerable families. During lockdown, the company donated A$10 for every 30 minutes of physical activity logged by MetLife Australia staff. 

‘This enabled us to continue our support while in-person volunteering wasn’t possible,’ says Kelly. ‘It also kept our people engaged and supported their wellbeing.’ 

The project, known as Fit for Humanity, achieved its target donation and 30 per cent of staff participated, completing an average of more than two hours of exercise per week. In a staff survey, around 90 per cent of respondents said they would participate again, 50 per cent increased their physical activity and more than 90 per cent said they felt good about making a positive contribution to the community. 

Responding to local CSR needs

According to Zach Wong, co-founder of Singapore insurance broker Provide, there are four broad areas of concern across South East Asia: environment; health and safety; education; and poverty relief. Different countries then respond to local needs. 

‘In Indonesia, for example, there’s widespread support for forest ecosystems,’ he says, pointing to  Japanese company Mitsui Sumitomo Insurance, which works with local authorities on the island of Java to protect tropical forests. 

‘Thailand has a very high number of traffic fatalities, so there we see insurance companies investing a significant amount in road safety education and other initiatives, such as Thai Life Assurance donating cycling helmets as part of the road safety campaign during the Songkran festival in 2021. 

‘In Singapore, we pay more attention to helping underprivileged groups. For example, AIA Singapore’s Better Lives Fund is an initiative that raises funds to support disadvantaged children, youths and their families.’

A leading role for insurers

Every sector has a responsibility to support sustainability. However, insurers have a unique insight into both impact and risk. 

‘We see firsthand the devastating effects of natural disasters when we’re on the ground helping our customers and their communities get back on their feet,’ says IAG’s James. ‘We also witness and understand the wider-reaching challenges caused by disasters, including the longer-term impacts on the economy and mental health of a community.’

Malcolm believes that continuing collaboration is the most effective way forward. 
‘The Insurance Council of New Zealand’s Climate Change Standing Committee is one example of industry representatives coming together to search for outcomes and solutions that are of value for the sector,’ she says. ‘We all have the same goal of creating a sustainable business and protecting our customers, and we need to help each other where we can.’  

ESG areas of focus

Environmental

• Climate change & strategy
• Biodiversity
• Natural resources
• Pollution & waste

Social

• Human rights
• Human capital development
• Health & safety
• Child labour

Governance

• Board diversity
• Business ethics
• Corporate governance
• Corruption & instability
• Executive pay

How companies can assign a value to CSR

Deloitte says one challenge many companies face is assigning a concrete value on CSR. It suggests using six drivers of business value to measure corporate social impact and put a monetary value to it.

1. 
   Brand differentiation — are you able to charge a premium because you’re known for your CSR activity? According to Nielsen, two-thirds of customers will pay more for sustainable brands.
2. Talent attraction and retention — do you have higher staff engagement and lower churn? The Cone Communications Millennial Employee Study found 64 per cent of millennials won’t take a job if the employer doesn’t have strong CSR values.
3. Innovation — have you developed new or improved sustainable products, or are you selling to new market segments? According to the NYU Stern’s Center for Sustainable Business, in 90 per cent of consumer-packaged goods categories, lines marketed as sustainable goods grew faster than conventional lines.
4. Operational efficiency — what are your savings from cutting carbon emissions and using fewer materials and less energy and water? For example, NZ agency Marx Design reduced its power bill by 40 per cent by moving to offices that were more energy-efficient.
5. Risk mitigation — are you mitigating environmental and social risk that would impact the business in the future? According to QBE, the cost of natural disasters globally has exceeded the 30-year average in seven out of the last 10 years. 
6. Capital access and market valuation — are you attracting greater investment and is your company value growing? For example, ING’s 1 billion euro loan to Philips in 2017 was linked to the company’s sustainability performance. If Philips’ rating goes up, the loan interest rate goes do

 Read this article and all the other articles from the latest issue of the Journal e-magazine here