Tag: ESG

Future-proofing Insurance: Embracing Sustainability in Insurance for a Resilient Future | Blog

Sustainability in insurance transcends traditional practices, weaving Environmental, Social, and Governance (ESG) elements into the core of day-to-day operations, thereby safeguarding the future of stakeholders and the planet. In this evolving industry, embracing sustainability is no longer optional but essential for mitigating climate risks, meeting regulatory demands, and ensuring long-term value in a world facing complex environmental and social challenges.

The shift toward sustainability in insurance

Sustainability is becoming increasingly critical in the insurance sector due to the escalating unpredictability of losses driven by climate change, economic instability, and social inequalities. As per a report by the National Oceanic and Atmospheric Administration (NOAA), in 2023 alone, the United States witnessed 25 climate-related disasters that each resulted in damages exceeding US$1 billion, nearly doubling the annual average from the previous five years and leading to 464 fatalities. Such extreme weather events, occurring in regions where they were previously uncommon, are compelling insurers to acknowledge their responsibility in environmental protection. Additionally, shifts in consumer behavior are influencing the move towards sustainable practices. A growing number of consumers, about 25%, are now willing to pay a premium for environmentally friendly products, such as electric vehicles and sustainably sourced clothing, expecting that the companies they patronize uphold similar ethical standards.

Regulatory changes are also pushing the insurance industry towards greater transparency and sustainability. In the first half of 2023, there were over 1,715 adjustments to the US state insurance regulations, many of which address climate issues. A notable example is the California Climate Risk Disclosure Survey, which requires insurers to disclose how they are managing climate-related risks. Moreover, entities such as the Securities and Exchange Commission (SEC) are preparing to enforce new mandates requiring climate risk disclosures, potentially impacting publicly traded insurance firms that do not proactively address climate change.

As a result, insurers have started developing and offering new products across personal, commercial, and specialty lines. In personal lines, companies have begun offering green property insurance, which covers eco-friendly materials and energy-efficient upgrades following a loss, as well as discounts for hybrid or electric vehicle owners to encourage sustainable transportation choices. In commercial lines, insurers in geographies like the US and EU now provide insurance for renewable energy projects and green building coverage, helping businesses transition to sustainable practices. These include coverage for renewable energy equipment, green construction materials, and tools to manage climate-related risks. Specialty lines see innovations driven by InsurTech, such as parametric insurance for climate risks and the use of IoT devices for real-time environmental monitoring, enhancing risk mitigation and encouraging eco-friendly behaviors.

Sustainable insurance in action

Insurers integrating sustainable practices into their value chains include:

  • AXA (2015), launching the AXA Climate School to educate clients on climate risks, enhancing client trust and risk management
  • Zurich Insurance Group (2017), initiating the Zurich Forest Project for reforestation, boosting their brand reputation and environmental impact
  • Allianz (2018), incorporating ESG factors into underwriting and investments, improving investment resilience and attracting ESG-conscious clients
  • Swiss Re (2019), ceasing re/insurance for the most carbon-intensive oil and gas companies, aligning with climate goals and reducing exposure to high-risk industries
  • Aviva (2020), setting a net-zero carbon target by 2040, enhancing long-term sustainability and appealing to eco-friendly investors
  • Munich Re (2021), investing in green bonds and applying ESG criteria to their investment portfolio, supporting sustainable projects and strengthening their market position in the green economy

Currently, while the integration of sustainability into corporate strategies is becoming crucial for many firms, the actual implementation of these strategies in a tangible way remains a very early stage for many companies. According to a global survey, 25% of insurers identified “grasping ESG-related regulations and guidelines” as their primary challenge in advancing their ESG initiatives. This was followed by 17% who cited “determining the most effective actions to take on ESG” as a key hurdle and 15% who pointed to “aligning ESG efforts with customer expectations” as a significant concern.

Challenges in implementing sustainable insurance

Besides the difficulties of managing risks in a world altered by climate change, the insurance sector also contends with issues arising from regulatory, operational, and market-related complexities.

  1. Regulatory uncertainty – Insurers need to navigate a complex web of local and international ESG-related regulations that can vary significantly from one jurisdiction to another. The lack of standardized regulatory frameworks makes it difficult for global insurance companies to implement uniform strategies across all markets. This regulatory complexity requires insurers to invest heavily in legal expertise and compliance functions to ensure they meet all applicable guidelines
  2. Lack of standardized metrics and data deficiency – The insurance industry relies heavily on accurate data to assess risks and set premiums. However, there is currently no universally accepted methodology for quantifying ESG risks, which complicates the integration of sustainability into traditional risk models. This lack of standardized data not only hinders the assessment and pricing of risks but also makes it difficult to track progress and measure the impact of sustainability initiatives
  3. Liability risks – One of the significant challenges for insurers in implementing sustainability is managing liability risks stemming from compensation claims related to climate change damages. As climate change increases the frequency and severity of extreme weather events, the potential for substantial claims also rises, impacting the liability side of insurers’ balance sheets. Additionally, there is an increased risk of litigation, with insurers potentially facing legal challenges for failing to manage or disclose climate-related risks adequately
  4. Affordability and availability of coverage – Affordability and availability of coverage pose significant challenges in implementing sustainability in the insurance industry. As climate change leads to more frequent and severe natural disasters, insurance costs rise, making coverage less affordable. High-risk areas, such as flood or hurricane-prone regions, for example, face higher premiums or loss of coverage, leaving communities vulnerable. This not only affects individual policyholders but also has broader economic implications, leading to underinsurance or no insurance in these zones
  5. Aligning sustainability with market and customer expectations – Insurers must balance the need to implement sustainable practices with the need to remain competitive and meet the expectations of their clients. This involves developing new insurance products and services that not only comply with ESG standards but also appeal to a market that is increasingly sensitive to sustainability issues

Shaping tomorrow’s insurance industry

In the insurance sector, several unpredictable developments stand out, including emerging risks such as an aging population, climate change, and cyber threats, along with the rise of the sharing economy affecting freelancer, auto, and home insurance markets and the integration of technology in the smart economy. Social factors, such as evolving consumer expectations for corporate responsibility and equitable services, also play a crucial role, as do governance issues like regulatory changes and corporate transparency. While accurately forecasting the future remains a challenge, identifying catalysts for market changes is possible. By combining historical data with industry insights, we can use a specifically designed model to construct various future scenarios. These scenarios illustrate potential outcomes and opportunities driven by key trends in environmental, social, and governance (ESG) aspects under different conditions [Exhibit 1]. With this approach, we can strategize effectively, choosing paths that optimize financial gains, enhance social impact, or minimize risks.

Slide1 1

Driving sustainability in insurance is not just about compliance with regulatory changes and risk management; it also involves capitalizing on new opportunities and fostering a more sustainable, resilient world. As financial intermediaries and risk managers, insurers have a unique ability to drive and support sustainable practices across different industries and communities. The following strategic key objectives present a structured approach for insurance companies to embed sustainability into each stage of their value chain, along with key performance metrics to align with broader societal goals [Exhibit 2].

Slide2

By embedding sustainability into its core identity and fostering innovation, the insurance industry can go beyond managing risks to actively stewarding the planet and its people. This transformation will not only reshape the industry but also significantly contribute to a sustainable, resilient, and equitable global future.

To discuss more on the importance of sustainability in the insurance space, please reach out to Debasruti Mitra at [email protected] and [email protected]  and stay updated by accessing Everest Group’s latest research on Insurance Business Processes.

Watch the webinar, What’s Next in Financial Services? Driving Transformation Through Sourcing, Technology, and Operations, to learn how the banking, financial services, and insurance (BFSI) industry is driving business transformation in response to evolving customer needs and the rapid adoption of AI and cloud technologies.

Impact Sourcing: The Asset Enterprises Could be Missing | LinkedIn Live

linkedin live

Impact Sourcing: The Asset Enterprises Could be Missing

Watch this event on LinkedIn which was delivered live on Wednesday, June 12, 2024

While the impact sourcing model continues to gain momentum with service providers embracing inclusive talent strategies, enterprise buyers are yet to recognize the win-win value of the model.

Watch this interactive LinkedIn Live event to discover the vast advantages impact sourcing delivers for enterprises and learn practical approaches to achieving business benefits while driving social impact. Attendees will also gain a better understanding of current sustainability commitments and goals that enterprises today are targeting. 🌱📈

During this collaborative LinkedIn Live session, we discussed: 

• What are the key benefits for buyers of impact sourcing? 💼💡
• How can enterprises find impact sourcing opportunities? 🌍🔍
• How do enterprises promote impact sourcing in their services contracts? 📝🤝

Meet the presenters

Tom McCormick Head Shot
Senior Director
Capital One Financial
CEO
IAOP
Principal Analyst Everest Group
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John Strum
Senior Director
Meta Reality Labs

Strategic Sustainability Partnerships: Aligning Objectives for Long-term Impact | Webinar

ON-DEMAND WEBINAR

Strategic Sustainability Partnerships: Aligning Objectives for Long-term Impact

Access the on-demand webinar, delivered live on May 30, 2024.

Sustainability has emerged as a critical imperative across industries amid growing concerns about climate change, resource depletion, and social inequalities. As enterprises near their commitment deadlines, they are looking to partner with leading sustainability enablement service providers for their tech, industry, and ESG domain expertise.

Sustainability enablement service providers offer instrumental solutions; however, knowing which provider to choose can be complex. Enterprises need partners who can not only address their immediate sustainability needs but also align with their long-term strategic objectives.

Watch this webinar as our sustainability experts presented the detailed profiles and capabilities of twenty-five sustainability enablement technology and services providers featured on the Sustainability Enablement Technology Services PEAK Matrix® and key trends to follow.

What questions has the webinar answered for the participants?

  • What are the key challenges enterprises face across geographies and industries in their sustainability journeys?
  • What are the demand themes in the market that sustainability leaders across the globe are following to accelerate their path to building purpose-driven organizations with sustainability at the core of all business operations?
  • What are the key trends shaping the sustainability enablement services market?
  • Who are the leading service providers, and what capabilities should clients assess to identify the right service provider for their organization?

Who should attend?

  • CEOs, CIO/CTOs, COOs, CPOs, Chief Sustainability Officers
  • Global sustainability heads
  • Head of climate and sustainability services portfolios
Dwivedi_Arpita
Practice Director
Kini Ambika
Senior Analyst
Soni Rita B
Principal Analyst for Sustainability and Impact Sourcing

Related Content:

  • The PEAK report is scheduled to be published early May

10 of the Top Carbon Accounting Software for 2024 | In the News

As business and IT leaders embark on a sustainability journey, the need to understand the organization’s effect on the environment is critical, especially the carbon dioxide it emits.

A starting point in an enterprise’s net-zero journey requires understanding carbon data management, said Ambika Kini, a Senior Analyst with research firm Everest Group. What constitutes effective management varies by industry and even specific business models. “Enterprises can benefit tremendously by investing in the carbon accounting software best suited for their needs,” Kini said.

Read more in Tech Target.

Sustainability Enablement Technology Services PEAK Matrix® Assessment 2024

Sustainability Enablement Technology Services

In today’s business environment, sustainability has evolved from a mere buzzword to a vital imperative for enterprises across diverse industries. This shift is driven by escalating concerns over climate change, resource scarcity, and social disparities, compelling businesses to lessen their environmental footprint and actively contribute to societal well-being. To address these challenges, sustainability enablement technology and services have become indispensable tools, providing instrumental solutions to navigate the complexities of sustainability initiatives. These technologies encompass various applications, including renewable energy, supply chain optimization, and waste reduction strategies.

Despite the growing recognition of sustainability’s significance, enterprises face significant hurdles in integrating sustainable practices into their operations. The lack of tangible market proof points, coupled with the ongoing evolution of standards and best practices, presents a formidable challenge to decision-making. Enterprises struggle to identify partners that can meet their immediate sustainability needs while aligning with long-term strategic goals. Successfully navigating this complex landscape requires careful deliberation and informed decision-making. Enterprises must select partners that provide innovative solutions and demonstrate a dedication to sustainability principles and values. By doing so, businesses can effectively navigate sustainability challenges while driving positive environmental and social impact.

Sustainability Enablement Technology Services

What is in this PEAK Matrix® Report

In this report, we explore the current state of the sustainability enablement technology services market, examining the trends and key drivers shaping demand-supply dynamics. The report also provides a detailed analysis of the sustainability-enabling capabilities of 24 providers based on their service focus, key Intellectual Property (IP) / solutions, domain investments, and demonstrated market proof points.


Contents: 

In this report, we:

  • Explore the sustainability enablement technology services market
  • Examine the key factors and technologies shaping the sustainability enablement technology services market
  • Outline our perspective on buyer adoption trends and explore 24 sustainability enablement technology service providers’ capabilities

Scope:

  • All industries and geographies
  • This assessment is based on Everest Group’s annual RFI process for the calendar year 2024, interactions with leading sustainability enablement technology service providers, client reference checks, and an ongoing analysis of the sustainability services market

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What is the PEAK Matrix®?

The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.

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How to Integrate Sustainability into Procurement Practices and Impact Sourcing with Everest Group’s Rita N. Soni | Podcast

In this podcast, Everest Group’s Rita Soni emphasizes the importance of integrating sustainability into procurement practices, highlighting impact sourcing to address social inequities. By prioritizing hiring from marginalized communities or supporting initiatives like second chance hiring, businesses can not only create positive societal impact but also gain tangible benefits such as lower absenteeism and higher retention rates.

As businesses seek to expand into new markets, particularly in emerging economies, Rita Soni underscores the significance of patience and understanding local dynamics. Partnering with local providers, leveraging recruitment firms, and investing in training initiatives are essential steps to navigate the challenges and capitalize on the opportunities presented by diverse markets, ensuring sustainable growth and success.

Tune into the podcast

From Buzzwords to Reality: Impact Sourcing and AI for Social and Business Advancement | Blog

Discover the transformative power of impact sourcing firsthand through Everest Group’s sustainability teams’ eye-opening visit to a NextWealth center in rural India.

Stepping out of our vehicle after a sixhour trip from our office in Bengaluru, Karnataka, to visit Mahendra NextWealths center in Mallasamudram (near Salem) in Tamil Nadu, little did we know how profoundly our convictions about impact sourcing would deepen. Terms such as automation, AI, inclusion, and sustainability are typically discussed as separate buzzwords in organizations; impact sourcing commendably brings them together. The Everest Group team quickly saw NextWealth’s operationalization of the impact sourcing model seamlessly combines the two worlds. Let’s share more about what we saw during our visit in this blog.

Seeing impact sourcing in action

NextWealth was founded in 2008 to employ graduates in less populated small Indian towns with colleges but limited job opportunities. The founders are Wipro veterans who have made a conscious decision to create opportunities that do not require migration to cities, maintaining social cohesion. Yet the service offerings do not differ from traditional providers, including AI/Machine Learning (AI/ML), Information Technology (IT) services, and Business Process Services (BPS) under a managed services model. Their diverse set of clients include tech, e-commerce, fintech, banking, financial services and insurance (BFSI), and healthcare.

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The Everest Group team with the NextWealth team in Mallasamudram, Tamil Nadu, India.

Leveraging impact sourcing to drive business growth: a three-pillar approach

Everest Group has written extensively about the variety of ways businesses can integrate impact sourcing with their operational strategies. NextWealth specifically achieves this by using a threepillar approach focused on:

  1. Strategic talent location: Hiring the right talent by establishing centers in areas with an ample workforce yet limited career opportunities in those locations
  1. Promising markets: Targeting high-growth services such as data annotation and AI solutions that allow the company to scale operations
  1. Systematic skills development: Creating step-by-step-based training modules for the delivery of services, resulting in increased efficiency and quality, as well as transferable talent

 

Impact sourcing through strategic location selection 

The primary qualifications for impact sourcing are employing typically excluded individuals in a deliberate manner. NextWealth intentionally hires graduates, particularly women, with limited access to quality jobs from India’s smaller cities, creating positive social impact and business gains. The centers are established in towns with colleges, thereby guaranteeing a stream of graduates. These locations also have a reliable internet connection (physical and digital infrastructure), a stable operating and business environment, and cultural ties to the community, including Chittoor, Hubli, Bhilai, Vellore, Puducherry, and Udaipur.  

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NextWealth’s team briefs the Everest Group analysts on how they use data annotation to automate security scans for luggage at airports and railway stations.

Delivery of high-growth services through sustained employment and skilling

Much of the societal discussion about generative AI (gen AI) is the elimination of jobs because of efficiency and automated tasks. Instead, we saw how embracing gen AI can also enable job creation. The NextWealth delivery we witnessed included AI/ML training data solutions, customer experience (CX) design, and auditing these solutions. We saw self-checkout store error analyses, product fraud detection design, and product placement with marketing tools. These services are delivered after rigorous training on the solutions and feedback loops to improve quality/efficiency.

The ultimate objective of impact sourcing is social impact 

Here are some of the social impact outcomes that particularly impressed the analysts and left a lasting mark:  

  • The recruitment focus on women has begun to reshape the perception of their role in society. Their marriage age in surrounding communities has increased by 2.5 years 
  • Hybrid work options have enabled many who might otherwise be unable to pursue careers 
  • The low attrition rate of about 12% is an indicator of a positive workplace culture and employee experience. It has also afforded the opportunity to promote within 

As we set out on our journey back from Mallasarudram to Bengaluru, the fatigue of the trip was overshadowed by the wonder of what we had just experienced. While we are aware of the constant Darwinian evolution of the global services industry, it was truly incredible to witness in practice a firm leveraging impact sourcing to create broader societal impact through a sustainable and prosperous business model. 

Read more about Everest Group’s impact sourcing research and our latest report, Impact Sourcing for Sustainable Development and a Brighter Future: Impact Sourcing State of the Market 2023. Contact the analysts who visited NextWealth: Rita N. Soni, Aiswarya Barjatya, Kanishka Chakraborty, and Mohammed Riyaz.

AI to Boost Sustainability If Carbon Costs Are Kept in Check | In the News

AI, especially generative AI today, is an important set of technologies needed to advance sustainability goals – but there are potential downsides to adoption.

The impact of AI will be broad across industries, as it’s poised to revolutionize sustainability technology and services in terms of expertise, pace, innovation, and cost, according to Ambika Kini, Senior Analyst for sustainability technology at Everest Group.

Power consumption remains the primary concern as the adoption of AI increases, according to Kini. However, many IT service providers are investing in R&D efforts to make their models greener to curb energy consumption and reduce the carbon footprint.

Read more in Tech Target.

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