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ESG – Responsibilities and Rewards

Environmental, Social and Governance (ESG) factors feature prominently in investment considerations and are used in risk assessment strategies incorporated into both investment decisions and risk management processes. In many ways, ESG supersedes Corporate Social Responsibility (CSR) to arrive at a more accurate assessment of a company’s actions.

“Increasingly the best founders have an answer not only to how they’re going to create financial value, but also to how they will do that in a responsible way, and these factors are interconnected.”

– Magda Lukaszwicz, Balderton Capital.

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We’re all connected. We’re all involved. Every business is deeply interlinked with environmental and social issues. The last fifteen years have brought this reality into stark relief. The 2008 ‘Credit Crunch’, the existential challenge of climate change, and the global Coronavirus pandemic all leave us in no doubt that the relationship between financial value and the wider values that frame the way we do business are undergoing profound change. Companies now, and even more so in the future, will have to commit to, evidence, and communicate sustainable value creation that includes:

- A multi-generational perspective

- Visible fairness and inclusion

- Transparent and accountable value creation

- Societal solidarity

Just like our scale-up customers, we’re committed to starting our journey with environmental and social values at the heart of our business.

“In a post-Covid world, each of us will have to rise to our responsibilities and re-earn the license to operate.”

– Tom Wynne, Capsule.


Increasingly businesses articulate environmental and social responsibilities through the mechanism of governance (ESG). As an example, McKinsey defines the elements of ESG as:

  • E - environmental criteria, includes the energy a company takes in and the waste it discharges, the resources it needs, and the consequences for living beings as a result. Not least, E encompasses carbon emissions and climate change. Every company uses energy and resources; every company affects, and is affected by, the environment.
  • S - social criteria, addresses the relationships a company has and the reputation it fosters with people and institutions in the communities where it does business. S includes treatment of employees, diversity and inclusion. Every company operates within a broader, diverse society.
  • G - governance, is the internal system of practices, controls, and procedures a company adopts in order to govern itself, make effective decisions, comply with the law, and meet the needs of external stakeholders.

ESG is much more than an exercise in doing the right thing. It is increasingly fundamental to value creation. Global sustainable investment now tops $30 trillion—up 68 percent since 2014 and tenfold since 2004.

The acceleration has been driven by heightened social, governmental, and consumer attention on the broader impact of corporations. It has also been driven by the investors and executives who share that same societal commitment, as well as understand that ESG is increasingly necessary for medium to long-term success.

ESG factors are now a tangible metric to assess a company’s strategy and performance by investors, lenders, business partners, suppliers, customers, employees, regulators, and other stakeholders alike.

Insurers are increasingly aware of ESG, when it comes to investment decision making (how they invest their capital). But this awareness isn’t yet flowing through to underwriting decision making.

Aviva chief executive Amanda Blanc has warned that the insurance industry cannot “speak with forked tongue” on global warming by doing one thing with its investment portfolios and another with the products it sells.

In an interview with the Financial Times, Blanc said the industry’s efforts to curb global warming also needed to be reflected in how it sold insurance. “The underwriting needs to catch up with the investments,” she said.


In a recent article, Chris Forbes the CEO of Cheeky Panda (a UK scale-up providing sustainable products made from bamboo) suggested that a business’s ESG rating could affect a +/- 15% swing in the valuation of a business. This not just shows the amount that companies can afford to invest in ESG, but also the rewards available for those that do.

In 2020 global insurer Allianz pointed to scientific evidence that companies with favourable ESG metrics outperform their less sustainable peers - attracting better employees; in motivating their workforce; gaining reputational advantage; and attracting less regulatory backlash.

Even still, the insurance market still doesn’t take into account ESG factors when assessing risk in SME underwriting. This means that businesses with a positive ESG profile are not rewarded, despite their being clear links between ESG factors and the risk profile of a business – their efforts are not recognised. Beyond this there is a risk that ESG businesses are paying premiums to insurers who do not share their values.

“In fact, here at Capsule we’re not just committed to operating this way, we want to go further and reward like-minded businesses who share our values.”

– Tom Wynne, Capsule.

Responsibilities and Rewards – The Capsule Way

As the first insurance broker to assess ESG factors in SME underwriting, at Capsule we believe that those businesses that rise to their responsibilities deserve to be rewarded.

At Capsule we assess the businesses of tomorrow in much broader ways than just the traditional approach used by the insurance market today.

We believe this is critical to understanding next-generation risk – and it’s true to the values we share with our customers. Because of this we are working directly with a small number of progressive insurers who are committed to taking these factors into account and rewarding these scale-up customers with better services, products and premiums.

We fundamentally believe that the successful businesses of the future will act responsibly, ethically and sustainably – and those that do should benefit from improved terms from the insurance market.

To find out more about the groundbreaking work we’re doing here at Capsule, and to start a conversation with us about how your values-led business can benefit from better insurance, drop us a line at hello@capsulecover.com.

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Capsule Insurance Services Limited t/a Capsule are an Appointed Representative of James Hallam Limited who are authorised and regulated by the Financial Conduct Authority (FCA), under Firm Reference Number (FRN) 134435. Capsule's FRN is 948838. Registered in England and Wales company number: 13340821. Registered office is 48 Belle Vue Terrace, Malvern, England WR14 4QG.

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