By Olivia Nnorom
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Baby steps begin to understand concept
Over the years, Environmental Social and Governance (ESG) has become a key concern for major sectors and industries in Nigeria. Increased focus and pressure from investors, regulators, employees and other stakeholders make ESG a topic that is not only critical at the board level, but also essential to cascade throughout operations of organisations.
ESG, also known as the three dimensions of sustainability, is used in contexts where investments referring to a set of measures is designed to ascertain how a company manages its potential impact on society.
In this context, the environmental dimension of ESG addresses issues related to the conservation of the natural world such as, climate change and carbon emissions, air and water pollution, biodiversity, deforestation, energy efficiency, waste management, waste management which can be associated with the challenges of the applauded industrialisation which despite its positive effect, has led to the degradation of the environment and encroachment of natural habitat.
Insurance as a sector whose primary aim centres around mutualising and managing risks, principles that recently, are inextricably linked to the ESG (environmental, social and governance) criteria, has its operators and regulators stressing on the need to leverage ESG integration in Nigeria’s and Africa’s insurance sector.
As a result, they noted that it is imperative that ESG be integrated into insurance risk analysis and taken into consideration when discussing concepts that need to be adopted to increase trust and penetration in the insurance industry.
Analysts also aver that adopting ESG principles by insurance companies both in Nigeria and across Africa creates a saner operating environment for stakeholders to excel.
Philip Lopokoiyit, chief executive officer of the ICEA LION Holdings Insurance Company, a general insurance company based in Nairobi, Kenya, advised insurance regulators and operators in Africa to adopt ESG to drive sustainable growth of the market on the continent.
Lopokoiyit, who spoke on ESG Integration in the African Insurance Industry at the recently held 2022 Insurance Directors’ Conference in Lagos, Nigeria with the theme: “Transforming the Insurance Industry through ESG Principles: Directors’ Roles”, said the key substance of the Nairobi Declaration on Sustainable Insurance (NSDI) was a declaration of commitment by African insurance industry leaders to support the achievement of the UN Sustainable Development Goals (SDGs).
He emphasised that the declaration is an Africa-focused initiative designed to encourage and support African insurance market players. He added that it is a convening tool that signals the willingness to develop ESG principles and solutions within businesses as insurance players become change agents in light of the biggest challenge facing humanity.
According to the ICEA LION Group executive, insurance can serve as a veritable tool to solve sustainable challenges such as, pollution, poverty, social inequality, biodiversity, climate change, among others.
He, therefore, suggested that the Nairobi Declaration on sustainable insurance should be given serious consideration by the Nigerian insurance industry.
Lopokoiyit argued that the declaration is important because while the UN Sustainable Development Goals (SDGs) are gaining momentum, progress to meet these SDGs from a financial services perspective was not yet at the speed or scale required.
He also stated that incentives that will address the various challenges posed to ESG should be provided by Nigeria’s insurance industry regulator, the National Insurance Commission (NAICOM), with an acknowledgement that climate change has inflicted serious negative effects on the environment. Hence, sustainability should be integrated into all investment decisions of insurance firms.
Ekerete Olawoye Gam-Ikon, a management consultant in insurance, said that ESG integration will help lift the face of the insurance industry in diverse ways, especially in the way the sector players will conduct their businesses and their perceptions by the public.
“In the insurance industry in Nigeria where ESG is just being introduced, insurance companies will begin to take a hard stance on providing insurance coverage for organisations whose activities damage our environment and erode governance standards. The question is, are we ready?” Gam-Ikon asked.
According to him, the adoption rate is ‘near zero’ because the conversations have just started to even understand the implications of ESG integration in the insurance industry.
The insurance expert also pointed out that the decision to adopt ESG can be very complicated and challenging for a market that is just trying to increase the uptake of insurance and insurance contribution to Nigeria’s GDP.
“I envisage that a few global insurance companies will adopt ESG but local insurers will struggle,” Olawoye said.
