The sustainability field has been in a perpetual state of anxiety since January, and for good reason. The current deregulatory environment makes it hard to argue the case for sustainability programs, budget, headcount and credibility. Without new mandatory reporting at the federal level, leadership at US companies may consider ESG purely optional. However, the lack of mandatory reporting obligations doesn’t reduce real and tangible effects of climate change, human capital management, or poor governance. These risks persist, whether or not managing them is “in vogue.” A recent article from Rachel Kyte, Dean of the Fletcher School at Tufts University, makes this point regarding the insurance sector, stating:
“The World Meteorological Organization reports that weather and climate disasters such as floods, heat waves and forest fires have increased fivefold in the past 50 years. These disasters have caused environmental harm, the loss of more than 2 million lives and more than $3.64 trillion in economic damage. Not talking about these risks doesn’t help homeowners and businesses that rely on insurance, and doing nothing to stop climate change worsens the threats. Some consultants and auditors have started sounding the alarm that increasing natural catastrophes could collapse the insurance market model we know today.”
The risks that ESG programs were created to manage aren’t going anywhere; in fact, they are likely to worsen. The insurance industry understands this well, and the real costs of extreme weather events are driving up premiums regardless of policyholders’ political beliefs. Companies that are cutting sustainability now might find themselves less able to deal with these realities when they manifest. Those willing to weather the political storm may find themselves in a better position to weather literal storms.
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