Can business afford to be distracted from the climate crisis?
Our research has revealed that dealing with the immediate pressures of energy transition in an uncertain geopolitical landscape, and accountability for greenhouse gas emissions on the journey to net zero, are proving a distraction from dealing with the overarching, immense threat posed by climate change.
With nations’ efforts to realise net zero milestones facing increasing scrutiny and legal challenge, and company’s sustainability positions being forensically analysed for “greenwashing”, a picture emerges of a business world in turmoil.
Key Findings
Energy transition is No. 1
Energy transition risk is the number one environmental risk businesses are concerned about now, jumping from 8% in 2021 to 22% today. Yet just 9% predict that it will be their top risk in 12 months’ time.
US worries about climate risk
The US is the only market in which energy transition is not the principal environmental concern, with fewer than one in five (18%) business leaders identifying it as the biggest environmental risk currently.
In the UK, 27% of business leaders surveyed identify it as the number one risk. While the focus on energy transition in Canada and Singapore is not as pronounced, at 22% and 21% respectively, it is still the primary concern.
Climate change to dominate in 12 months' time
More than 1 in 3 (34%) of business leaders in the US predict that climate change will be the biggest risk they will face in 12 months’ time.
The gulf between preparedness widens as environmental risks intensify
The insurance industry can play a key role in supporting the transition to a greener future through its underwriting and investment policies. Insurers can use their position as facilitators of transition and enablers of progress – but we also have a responsibility to encourage resilience and to challenge clients to develop their clean energy strategies, emphasising both the commercial advantages and reputational risks of failure to keep pace.
What is the latest Beazley research telling us about environmental claims?
Climate change leaps into lead risk position 12 months' from now
Short term energy transition concerns dominate today
Advancements in technology are exposing a plethora of environmental risks to which businesses were previously unaware.
As regulators and a more informed consumer base become more aware of the dangers of business practices which had, for decades, been considered safe, a complex web of new environmental liability risks is emerging. Exacerbated by an increasingly litigious environment, particularly in the US, businesses will need to consider whether they are aware of and resilient to these new risks, and insurers will need to carefully evaluate their exposures.
We’re seeing climate related claims increase in volume and can only expect court cases to continue to grow, particularly as these claims are often amplified by media attention.
Next steps
Searching questions should be asked about how businesses are dealing with environmental concerns, and the insurance industry also needs to explore how companies are monitoring and managing risk in these areas. This should be part of every D&O renewal meeting discussion.
With so much external focus on environmental risks, we feel it is important to support businesses who are actively managing such risks, hence Lloyd’s Syndicate 4321 offering additional capacity to businesses that perform well against ESG metrics. We must also work with our clients to help facilitate a just transition, mindful that decisions today can have long-term consequences, as businesses navigate commercial pressures and environmental imperatives.
The insurance industry can play a key role in supporting the transition to a greener future through its underwriting and investment policies. Insurers can use their position as facilitators of transition and enablers of progress – but we also have a responsibility to encourage resilience and to challenge clients to develop their clean energy strategies, emphasising both the commercial advantages and reputational risks of failure to keep pace.
