ESG Spotlight: The ESG opportunity for SME brokers

It would be a mistake for any SME broker to push environmental, social and governance (ESG) issues down the agenda.

This is because insurers are waking up to the huge opportunity ESG offers in the SME space – and they need brokers on board.

In an Insurance Post survey this year of insurance professionals at major insurers, backed by data provider CRIF, around two-thirds of respondents said the current ESG initiatives and regulatory framework had led them to create new green insurance products. (See box ‘Green shoots’)

Forward-thinking brokers are seizing the opportunity, understanding the importance of ESG.

Stuart Reid, chairman of Partners&, says: “For their own business, it is something very much within their control.”

Ryan Birbeck, Aviva broker and client development director, says: “At an SME level, for those that are involved in procurement or partner supply chain, it is becoming more and more prevalent.

Perhaps the view may be somewhat cynical in the market about brokers and ESG, but certainly the ones that I’m involved with take it very seriously.

Stuart Reid, chairman, Partners&

“Therefore, we want to arm brokers to be able to talk about it with their clients and have good conversations – to help them as a business because it is a huge topic.”

ESG is a big topic, but three tangible opportunities for brokers to help their customers are as follows: brokers improving education on ESG; accessing insurers’ green-friendly products and services for clients; and using ESG as a lens to view risk profiles and improve it.

Risk management

The first question a broker might ask is, ‘What is ESG and why is it important?’

According to the British Business Bank, a government-owned bank that supports SMEs, ESG is a set of standards measuring a business impact on society, the environment and how transparent and accountable it is.

Knowing this, a broker might look at how their own business, and their customers, are performing against ESG issues.

This is important because companies falling short on ESG could face reputational damage and even legal action.

For example, customer data privacy now falls under ESG.

A survey last year of commercial insurance brokers, carried out by FWD Consulting, found data privacy and customer security were the highest ranked ESG importance scores.

Top factors under the environment bracket were waste management and energy management.

Business ethics and competitive behaviours came out top under the governance bracket.

On data privacy, FWD research head Julian Green, says: “Brokers are facing a myriad of cyber risks in the current climate such as the threat of cyber-attacks, data breaches from third party agents, GDPR and scrutiny from their carriers.

“These issues combine to make data security the biggest ESG risk for commercial lines insurance brokers.

“While fines are always damaging, brokers are more motivated by the threat of reputational risk and the impact that could have on their business and their business partnerships over the long term.”

Green points to insurers who can help with this important ESG issue.

“Regulatory pressure is obviously a driver here, but brokers are more likely to be guided by their insurer partner for best practice,” he says.

Aviva is one insurer ready to support brokers and businesses with their risk management on ESG.

Good risk management underpins any meaningful ESG programme.

David Schofield, sustainability director, social action and sustainability, Aviva

David Schofield, Aviva sustainability director – social action and sustainable business, says: “As such, we support customers everyday with their sustainability transition, whether that’s moving to a greener fleet, or the introduction and management of both localised or grade scale renewables, such as solar panels, battery energy storage systems or wind turbines.

“We also provide a lot of guidance in this space. We continue to publish a series of loss prevention standards which are available on Aviva’s risk management solutions website. A new Lithium-Ion risk management guide is due for release this month.”

Green products and services

Another ESG opportunity for brokers is to access green-friendly insurance policies and take advantage of the ESG-friendly services insurers offer.

Schofield says: “Last year we introduced stand-alone insurance cover for EV charging points and expanded our underwriting appetite to include engineered timber in commercial developments, making us one of the first UK insurers to commit dedicated underwriting resource to the development of more sustainable buildings.”

AXA and Allianz are two other insurers creating ESG-friendly products which brokers can offer their SME clients.

Doug Barnett, AXA director mid-market and customer risk management, says “A number of our business customers are now seeing electrical charging points as a positive to attract customers into their business.

“If you look at your Lidls, your Tescos, you’ll find charging points in all these car parks now.

“We are also seeing builders’ merchants and suppliers to the contractors’ trade, who now want to provide charge points for the customers.

“So, somebody can go into the builders’ merchant for thirty minutes to an hour and plug in because we are now starting to find a lot of vans are going EV.”

To help achieve its net zero ambitions, Allianz is incentivising customers to go green.

A spokesperson said: “As for our motor insurance customers, if there is a claim to compensation for the new price in the event of a total loss and the insured vehicle is a car with a combustion engine or hybrid drive, an additional 2,500 euros on top of the new price will be reimbursed if a purely electrically powered car is purchased as a replacement.”

Training and education

One of the major obstacles in getting brokers and SMEs to embrace ESG is a lack of training and education. 

The FWD research of commercial lines brokers found the top reason for non-engagement with ESG was that ‘we do not understand what is required in order to be fully ESG compliant’. 

Help is at hand, however. There are opportunities to take advantage of free education and training.

Aviva, for example, launched the Sustainable Business Coach tool in September last year. The tool helps brokers upskill on sustainability and discover the impact their business has on the environment and wider society.

Birbeck says: “We found we can help brokers make sense of this enormous ESG topic.”

As an example, the tool helps brokers understand the energy usage in their office and where it comes from.

If a broker supplies company cars, the tool might make them think about using EV fleets.

Another major benefit is that brokers can elevate their ESG knowledge, and in turn, help their local community by providing better ESG advice to customers.

Birbeck adds: “I know from speaking to brokers, no matter what size they are from the local to the global, they all have a passion to support the local community.”

AXA also offers educational assistance – through its AXA Climate business unit. The unit developed a 12-module training programme for the group that all full-time employees must complete.

Four of the 12 modules are offered free to brokers. They can also pass it on to their customers.

Barnett says: “In AXA commercial we definitely want to educate brokers, but also SMEs.

“Sometimes it's difficult to reach the SME without the broker. So, you then have to make sure brokers understand it, and understand in a way that they can use it to talk to colleagues and then their customers.”

Taking ESG all together – the products, education, and service on offer – there are plenty of ways brokers can help SMEs.

Weighing it up, Reid says: “The opportunities that [ESG] offers up to this nation of shopkeepers that we insure, and businesses in the UK that are SME, is huge. There are huge opportunities to engage with clients, not only about what they do, but the rest of the risks they run.”

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