Head of sustainability and climate change strategy believes ’good ESG leads to fewer insured losses’

To create a thriving environmental, social and governance (ESG) agenda, firms must make “bold commitments” and not follow the path of fallen healthcare technology unicorn Theranos, according to Amy Barnes, head of sustainability and climate change strategy at broker Marsh.

Greenwashing, where companies convey a false impression about being environmentally friendly, is becoming an increasingly prominent industry hot potato. For example, in June 2022, the Mothers Rise Up climate action group staged a Mary Poppins-themed flash mob demonstration outside Lloyd’s of London’s Lime Street base, urging the market to scrap its insurance of fossil fuels.

However, instead of being scared to take ESG-centric steps where “there isn’t currently [an] action plan”, Barnes emphasises that insurance companies need to be “ambitious”, while ensuring that ESG commitments are “based on something”, instead of following the route of Theranos founder Elizabeth Holmes.

Holmes established blood testing startup Theranos in 2003 and the business quickly reached a valuation of around $9bn (£7.3bn) by 2014.

However, following a number of Wall Street Journal articles in 2015, Holmes and her colleague Ramesh Balwani were charged with fraud by the US Securities and Exchange Commission after an investigation discovered that the unicorn’s technology had not, in fact, been submitted for peer review in medical journals and its advertised benefits could not be clearly demonstrated.

For insurance firms to avoid similar ESG inaccuracies, therefore, Barnes thinks the “way to bring change is to make it very tangible for people, so they can understand their role in helping [to] deliver the transformation that companies need to go through”.

This process can be difficult because many professionals view the climate crisis as “so big”, meaning that it can “feel too distant and too hard” to tackle as a single individual or firm.

Linked to this mentality, Barnes believes that although many companies are “committing to reaching net zero by mid-century”, this is often ”without fully knowing how they’re going to achieve that because the technology doesn’t exist”.

“The regulatory framework [also] doesn’t exist [and] we don’t have carbon pricing,” she continues.

For Barnes, who is Marsh’s climate champion, the most important way to steer industry progess around ESG credentials is to show that “we’re still making a commitment – saying that this is what I’m going to do with my business and I’m going to work really hard to figure it out”.

This approach can include both “small steps that make short-term, incremental changes” and “long-term projects that are properly funded”, Barnes adds - however all ESG commitments must be supported by firms’ senior leadership otherwise success is impossible.

Amy Barnes, Marsh

Amy Barnes

Reducing insured losses

Barnes began her pursuit of addressing the “most important issue of our time” in March 2021, when she made the move from Houston, Texas to London, taking on responsibility for leading Marsh’s global strategy on the development of climate and sustainability-related initiatives.

“I’m utterly convinced that we will find [that] good ESG leads to fewer insured losses,” Barnes says.

One project Barnes has spearheaded has been the creation of an ESG risk rating assessment tool, which Marsh launched in March 2022. This aims to help firms better understand their ESG performance, so they can make more informed, strategic decisions.

In particular, the technology hopes to help “private and small companies that don’t have the resources for sustainability officers”, helping them “look in the mirror” and accumulate data to provide a “risk lens”, Barnes explains.

This approach contrasts existing assessment frameworks, which Barnes believes are “built for investors”.

Despite being designed for smaller firms, around 24.6% of clients that have completed Marsh’s risk rating have revenues over $1bn (£8m).

Marsh is planning to test the data this summer, with the intention of publishing anonymised results in Q4 2022. In addition to scoring ESG commitments, this data will help the broker determine whether “good ESG leads to fewer or less severe losses”.

Barnes is passionate about this type of project work, describing it as a “real privilege” to ”do something you feel passionately about”.

She adds that climate and sustainability are “technical” yet “tangible” topics, where clients can gain “real value” and “differentiation”.