Potential impacts of an environmental incident can include:
- Interrupted operations
- Disrupted supply chains
- Eroded investor confidence
- Significant reputational damage
- Regulatory penalties
- Underperformance to peers
- Takeover or bankruptcy
In response, many energy companies are seeking support from specialist risk advisors and brokers to explore how risks can be quantified, managed and/or transferred into the insurance market.
Specialist risk advisors can provide valuable insights into the potential operational and financial issues associated with environmental risks, and model the potential impact on an energy firm’s bottom line. Determining how well material environmental risks are addressed within a firm and the policies and procedures in place, can enable a reduction in the total cost of risk through the provision of innovative solutions and access to global insurance markets. In turn, energy firms can pursue commercial opportunities with greater confidence.
Environmental, Social and Governance (ESG)
The management of material ESG risk is a key driver of corporate performance, investment dollars, shareholder engagement/proxy voting, consumer behavior, public relations, regulatory activity and disclosure around the world. Investors, corporations, regulators and consumers are increasingly considering ESG factors in their day-to-day activities. ESG-focused investment funds recorded record inflows in 2019 and a 2019 Aon survey of institutional investors found that almost half of those polled believe that incorporating ESG analysis into the investment process results in better investments. Going forward, scrutiny of ESG practices is expected to continue to grow globally.
Depending upon the product sector and geographic region of operation for energy companies, ESG analysis and action could also be a key factor in how firms navigate the complex topic of climate change. Evaluating key ESG risks, assessing transition strategies and creating a multi-year glide path to a cleaner energy future may well be critical to maintaining the capital base, complying with global regulations, and brand management.
With the support of a specialist ESG advisory practice, firms can navigate the ESG and climate change landscape by:
- Evaluating material environmental, social and governance risks and opportunities within your organization
- Determining how material ESG risks are addressed within your firm, both among peers and against best practice guidelines
- Advisory in development of substantive policies and procedures to reduce material ESG risks while also capitalizing on any business opportunities they may create
- Review oversight procedures at the executive and board level
- Analysis and review of ESG activity disclosure in both regulatory filings and supplementary reporting, including investor engagement plan
(Click the hexagons for more information)
When operating in diverse and remote regions, clients should expect an approach to risk management that is truly global and delivers collaborative solutions across the full risk profile.
At Aon, we deliver localised expertise on a global scale. Our market share and global footprint enable our teams to monitor market trends through sophisticated data and analytics, and develop models to forecast how these trends affect our clients. Our energy hubs operate in many regions, providing direct access to our global industry specialists, risk engineers, consultants and local and international insurance markets.