Firms failing to address environmental risk

Environmental issues are bottom of business leaders’ concerns and set to fall further in 2022, according to specialist insurer Beazley.

Only 12% of business leaders across ten industry sectors in the UK and US rank environmental concerns, including pandemic, climate change, environmental damage, food security and energy transition as their top risk category in 2021, falling to just 9% looking forward to 2022.

Chris Illman, head of Responsible Business, Beazley said: “The discussions and announcements at the recent COP26 summit, demonstrate the increasing stakeholder, governmental and regulatory pressure that businesses now face to align their operational practices to the fast-changing environmental agenda.

”Failure to do this will result in increased legal, reputational and regulatory risks. So, it is surprising and concerning, that our research reveals that environmental risks ranked so low on business leaders’ list of concerns.”

Beazley’s research highlights that businesses’ may be focusing much of their effort on the interconnected legal, reputational and regulatory risks of compliance with ESG reporting, rather than actively addressing environmental risk, with 18% ranking political and regulatory risks their top concern in 2021.

Illman added: “Environmental risk mitigation presents a significant challenge. The complexity and interconnectivity of the risks have the potential to generate claims that straddle traditional areas – from pollution and environmental damage, through to new areas of risk like greenwashing and reputation damage.”

”But they also represent an opportunity for specialty insurers like Beazley to work with clients to go beyond pure risk transfer to improve management and mitigation of risks to minimise the likelihood of a loss event.”

The report ‘Spotlight on Environmental Risks’ is the latest in its Risk & Resilience series and compares business leaders’ attitudes to different categories of risk and assesses perceptions of resilience.