Becoming a More Attractive D&O Insurance Risk: Companies Must Embrace ESG Initiatives

In recent years, corporations have started investing more heavily in environmental, social, and governance (ESG) initiatives and have become increasingly focused on employing ESG standards in their operations. ESG efforts align with the modern trend of corporate boards adopting a philosophy of “corporate responsibility,” in which they consider the long-term impact of their operations and strive to advance the interests of a wider variety of stakeholders. Though often associated with preventing climate change and reducing carbon emissions, corporate ESG concerns actually are broader in scope and include focus on sustainability, diversity, equality, employee welfare, and cybersecurity protocol.

Companies are investing in ESG initiatives, not only to strengthen their public image and be responsive to stakeholders, but also because a demonstrated commitment to ESG initiatives is becoming critical to doing business in the modern age. For example, many lending firms and institutional investors are shifting their investments toward companies that meet their ESG standards, and financiers may even withhold financing for certain projects that fail to meet those standards. As a result, failing to develop strong ESG initiatives may result in limited access to capital and lost business opportunities.