ESG: companies can ‘do well by doing good’
Albert Benchimol is a strong believer in good corporate citizenship. The president and chief executive officer of Bermuda re/insurer Axis Capital Holdings Ltd says the company has always been a “values-led organisation”.
Environmental, Social and Governance (ESG) principles have risen in prominence in recent years as a growing number of business leaders strive to have a positive impact on society.
The ESG concept manifests itself in different forms at different companies. At Axis it was a case of pulling together things the company was already doing into its corporate citizenship programme, formalised last year, whose four pillars are the environment, diversity and inclusion, philanthropy and advocacy. With this framework in place, Axis is focused on further growing its corporate citizenship work. Mr Benchimol believes the company is in the early stages of what will be an ongoing effort.
“I’m a believer that you can do very well by doing good,” Mr Benchimol said. “Our corporate citizenship is one of the major contributors to our culture and engagement.”
Employees respond positively to ESG, Mr Benchimol said, helping to stimulate the engagement that is an important factor in the company’s success.
“Increasingly people don’t just want to work for a paycheque,” Mr Benchimol said. “They want to work for an organisation that has a strong social purpose and that lives and reflects their values. People want to bring their whole experience and their own set of passions to the office.
“The more they feel they work for an organisation that lives their values, the more it creates a bond between the company and the staff and it leads to a better culture.”
Localising volunteer work and charitable spending is a way that Axis further strengthens that bond with employees. The company provides employees with paid time off to volunteer year-round and holds an annual Global Giving Rally period. In 2019, more than 1,000 company volunteers, 15 per cent more than in 2018, participated in more than 70 events globally.
In terms of the Axis philanthropy budget, some is determined at group level, but a significant percentage is allocated to local offices.
Mr Benchimol said: “Axis has nearly 100 people involved in its office philanthropy committees. They are the ones who choose which charities are important and relevant locally. This makes people feel good about the fact that their company is having a positive impact in their community.”
Bermuda re/insurers who manage natural catastrophe risks are acutely aware of the threat climate change poses to the planet. In 2019, Axis introduced a policy to limit thermal coal and oil sands underwriting and investments and established a working group to assess and evaluate potential climate risk-focused actions. At the same time, Axis has positioned itself as a leading insurer of renewable energy.
Hiscox, another Bermudian global re/insurer, also takes it environmental responsibilities seriously. The company, which has been carbon neutral since 2014, publishes regular updates on its climate impact.
In Hiscox’s Climate 2019 report, Mike Krefta, the CEO of Hiscox Re&ILS and also the group’s executive sponsor, ESG, states: “We understand that we are part of something beyond the bottom line and take our role in the world seriously.”
Mr Krefta adds: “We are living in exceptional times, when both personally and professionally there has never been more discussion around climate change and its current and future implications for the world we live in.”
Among Hiscox’s environmental principles are to incorporate climate-related issues into its investments; to lead in the identification, understanding and management of climate risk; to reduce the business’s environmental impact; to inform public policymaking; and to support climate awareness among its clients.
On the social side of ESG, Hiscox strives to “build teams that are as diverse as the customers we serve” and create an inclusive work environment where all employees can thrive. Over 400 employees among its global workforce of 3,300 have received unconscious bias training, and Hiscox also has more than 75 trained mental health first aiders.
The company placed fourth out of 50 companies in the 2020 Glassdoor Employee’s Choice Awards — a survey of the best places to work in the UK, based on employee reviews.
So does the growing focus on ESG mean that one of the traditional definitions of the firm — to maximise the wealth of shareholders — is no longer relevant? Mr Benchimol argued that profitability and ESG have a symbiotic relationship.
Mr Benchimol said: “The way to maximise the wealth of your shareholders is to create a long-term stream of growing profits. To do that, you need to have great relationships with your staff, your communities, your suppliers.
“In the evolving conversation, nobody is saying we should not try to make the most profit possible. We believe we can create strong profitability by being good at what we do, providing great products, but also by being great citizens. You can do well by doing good.
“An important role of corporations is to generate profits so they can pay salaries and contribute to the economy. But the best way to generate profits is to have the best talent possible. And the best way to have the best talent is to have a strong culture and values that align with those of your staff.”