ESG in Insurance: A practical guide to sustainability reporting

As part of the environmental, social and governance (ESG) agenda, sustainability reporting requirements are changing the business landscape. For insurance organizations, sustainability reporting has become commercially and strategically important and offers a number of potential benefits to those who can successfully integrate it into their operating model.

However, sustainability reporting presents some challenges. Whereas there are long-established processes and controls in place for financial reporting, the same is not the case for non-financial information.

In this report, KPMG professionals explain how insurers can drive a successful transition to embed sustainability reporting through the organization. This requires non-financial reporting processes and metrics to be embedded within the operating model so that disclosures become a natural output of how the business functions, rather than an additional onerous effort.

Sustainability reporting matters. It’s a way for insurers to demonstrate how sustainable the organization is to its clients and customers. It’s an opportunity to help live out the company values. And the market is increasingly requesting details on sustainability policies and practices.

What’s more, for insurance businesses sustainability can drive competitiveness and increased sales – such as through the large and growing market for green or ethical insurance products and investments. It can also drive the share price, by demonstrating to investors and rating agencies that the organization has a resilient and sustainability-conscious business model, enhancing its position in sustainability index ratings. 

Businesses are often at different stages in their sustainability reporting journey, driven by how important sustainability is to their corporate strategy and the regulatory jurisdictions they operate in. One key consideration as leaders develop their ESG strategy is the creation, or review, of a target operating model (TOM) for sustainability reporting, for example, through a Center of Excellence (CoE) model. Designing this up front can provide the organization with the flexibility of approach: transform quickly, or evolve organically over time, leveraging other ongoing change initiatives such as controls, technology and data improvement projects.

As insurance organizations define their sustainability reporting strategy, it’s important to identify and prioritize what is material to the business. This should focus on getting ahead of the fragmented and evolving regulatory landscape, meeting the needs of priority sustainability rating agencies and grasping the opportunity to proactively support their reputation in the market. Bringing this together upfront can help identify synergies between the different demands, saving time, cost, and the challenge of continual compliance battles.

Wherever the business sits, the following challenges are likely to be critical on the path to success:

• Disclosing the right information
• Confidence in reporting and getting ready for assurance
• Delivering on public targets and commitments
• Data flows
• Technology and automation
• New workload and skills
• New methodologies and approaches