Captives can drive ESG progress

Environmental, social and governance (ESG) and sustainability goals are becoming crucial for companies across industries and regions, and captives have the potential to play a key role in advancing these efforts. 

This was the main takeaway from a panel session at FERMA Forum 2024, moderated by Laurent Nihoul of ArcelorMittal. The panel included Butch Bacani from the United Nations Environment Programme (UNEP), Franck Baron of International SOS, and François Beaume of Sonepar.

Launched at the 2012 UN Conference on Sustainable Development, the UNEP FI Principles for Sustainable Insurance (PSI) serve as a global framework to address environmental, social and governance risks and opportunities in the insurance industry. 

The PSI Initiative, which boasts nearly 300 members worldwide, envisions a risk-aware world where the insurance industry fosters a healthy, resilient, and sustainable society. Its goal is to better understand, mitigate, and manage ESG risks while leveraging opportunities for reliable risk protection.

“Of the nearly 300 companies signed up for the UN principles, only four are captives.”

Bacani, representing the UN, stressed that it is important to understand risks in the modern world and the insurer’s role in managing them. The panel agreed that captives could support ESG initiatives by funding risk management activities that improve the overall approach to ESG.

However, the panel also acknowledged the practical challenges in fully understanding and implementing ESG. It may take several years for companies to get the most out of it.

The panel highlighted that of the nearly 300 companies signed up for the UN principles, only four are captives.

Panellists said this is a worryingly small number, especially given the global shift toward a sustainable economy. They noted that just a few years ago, many companies lacked any ESG initiative, yet now more regulations are being implemented. Corporate disclosure requirements are already in effect in Europe and the UK, with countries like Australia and Singapore set to follow next year.

While the panel acknowledged that captives cannot solve every issue in ESG, they emphasised that captives can be instrumental in driving transformative change in risk management and strategic planning. “We can spread our wings and make a difference,” urged Baron.

One reason for the low captive participation in ESG initiatives, the panel suggested, might be the fear of change and the complexity of ESG itself. Technical concerns remain high in some areas, and captive managers must step up and address these challenges to move the needle forward.

The panel concluded that while significant challenges lie ahead, a mindset shift is necessary. By embracing new ideas, captives can help accelerate ESG progress.

FERMA Forum Today is in partnership with Captive Review, part of Newton Media.

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