ESG (environmental, social, governance) has developed into a global initiative for many business leaders, regulators, insurers, activist groups, and the general public, causing its popularity to be reflected in the abundant number of professional services providers specializing in ESG. Needless to say, this growth in ESG can also be largely attributed to the ongoing rise in regulatory changes in ESG, such as the SEC now requiring all public companies in the US to disclose information that may be material to investors, including data on ESG-related risks. While in the UK, ESG reporting is now required for publicly listed companies whose annual turnover exceeds £500 million or have over 500 employees. Some other countries, such as the Philippines, Singapore, and Malaysia, have similarly implemented ESG disclosure requirements. This increase in ESG regulations, coupled with stakeholder pressure, poor uniform reporting standards and metrics, and anti-ESG supporters criticizing the lack of evidence to support a return on investment (ROI), have left some business leaders drowning in confusion. However, despite the criticisms and frustration surrounding ESG, some research is beginning to indicate that there is a correlation between ESG and financial performance. For example, a study between Bain and EcoVadis found that companies that scored highest on the S component of ESG had higher executive team representation for women on average and the firms which excelled in this regard also tended to have better financial results. These findings have led some organizations to realize that in order to remain competitive, at least for the time being, integrating ESG into their overall business goals is an absolute necessity.

Some professional services providers have met this challenge and evolved their ESG expertise from a compliance-driven approach to a strategic one that helps clients align ESG initiatives to their organizational goals. Fundamental to developing a strategic approach to ESG is the ability to use data to develop strategic frameworks, mitigate risk, meet rising consumer expectations, and optimize business performance. The insurance industry, inherently risk-averse, has a unique competitive advantage, given the plethora of data they have accumulated, specifically related to the environmental aspect of ESG, such as tracking claims related to climate events. However, with the exception of a few insurance providers, the insurance industry has been unable to leverage data and analytics effectively. It has typically lagged behind other professional services providers, inhibiting them from offering a proactive approach to ESG.

Insurance firms collect a multitude of data over the years to inform decision-making and guide underwriting, pricing, and policy development. Many insurers also buy third-party data to enhance their data sets. However, because of the need for well-defined criteria and well-established data collection processes, insurance firms have little uniformity in how they collect data. In some instances, this may also happen across business units within the organization, generating unstructured data. As a result, these legacy systems of capturing data are counterproductive, as it creates a barrier to effectively aggregating data and analyzing trends to help provide the best solutions for clients. Working with unstructured data sets also makes it challenging to make decisions promptly, which can cause frustration for clients who need solutions quickly. Furthermore, another challenge that stems from this is the quality and certainty of the data. Some data can be outdated or inaccurate due to improper management over time. Capturing and managing data in this archaic way has resulted in an enormous amount of fractured data making it more difficult for insurance firms to build cohesiveness and seamless data integration to extract value. However, as pressure from stakeholders increases with ESG, some innovative insurers are beginning to manage their data such as claims, third-party liability databases, and climate and weather information more efficiently to enable them to develop a proactive approach to help clients strategically manage their ESG initiatives.