ESG: Can insurance firms prompt change in the mining industry?

ESG: Can insurance firms prompt change in the mining industry?

ESG: Can insurance companies drive change in the mining industry? | Insurance Business America

“Our job is to support our customers’ transition,” believes the CEO

Environmentally friendly

By Daniel Wood

“I’m not in any way, in any way whatsoever, supporting any market – whether here in Australia, London or anywhere else – that just turns their backs on the energy and mining sectors instead of working with them,” said Nick Cook (pictured above). “Our job is to support our customers’ transition, and that’s exactly what we’re doing.”

Cook is CEO of global brokerage firm BMS Group. The London-based boss was recently in Australia, where the local economy is heavily dependent on the fossil fuel industry. Many insurers and brokers, including BMS, provide the necessary insurance coverage.

However, unlike some other insurance leaders, Cook has been frank and direct on the subject. He also made it clear where he sees responsibility for his company – a brokerage firm with a focus on the energy sector.

“Climate change is here,” he said. “We live and breathe it every day and the industry needs to adapt to it.”

“We want to work with our customers, our employees and all of our stakeholders to move the market towards more sustainable and environmentally responsible business practices,” Cook said in a media release welcoming the appointment.

Lead the energy sector towards ESG

Insurance Business asked Cook what his company has accomplished with clients on ESG over the past year. IB suggested it must be difficult to have these conversations with miners?

“A really great question,” Cook said. “I think there are two ways to answer that.”

The global CEO said that as a private company headquartered in the UK, there are currently no explicit regulatory requirements for his company to “enforce an ESG agenda”.

“But I made a decision that I felt we needed to lead because of the mix of our portfolio where we deal with a lot of energy and mining risks – and a lot of those mining risks are here in Australia,” said Cook.

He said the “only way” to achieve this in the insurance market and in all financial services is to “put our own house in order first”. He said that BMS, under Prior’s leadership, has been doing just that for the past 12 to 18 months.

“I’m looking at this across three levels,” Cook said. “The first: putting our own house in order; Second, move to specific workflows with a specific customer base. Third, collaborating with our markets across the ESG sector.”

He said the “E” in ESG, the environmental aspect, “was the biggest challenge.”

“Similar to other brokerages and many other firms, we engaged an outside ESG specialist third party to conduct a gap analysis across our business,” Cook said.

Apex and carbon footprints

In October 2021, BMS engaged Apex Group to provide carbon footprint reports and support plans to reduce the company’s carbon footprint. Cook said some of the ESG lessons learned through Apex have been “pretty harsh.”

“We set aside capital to invest in areas where there were clear gaps in our ESG policy — which Neil Prior has implemented over the last 12 to 18 months,” Cook said.

Cook said part of that work has included achieving energy efficiency at its global offices, reducing international travel and, where travel is necessary, consolidating multiple trips into one. The company has also invested directly in carbon offset programs.

He said the result placed BMS in the top decile of financial services companies in the UK and Europe on ESG.

“It allows us to approach the conversation with our mining customers and our energy customers with credibility,” Cook said. “I think it’s the duty of our industry and the insurance brokerage community to be part of the solution to help these companies, especially some of these mining companies, effectively weather a significant period of change.”

Cook said that an ESG transition by a fossil fuel energy company away from “certain types of coal mining and towards cleaner energy” would take “a long time”, possibly four to five years.

No draconian steps

“While I think some insurers have taken a pretty draconian step by stating that within the next 24 or 12 months they will not be renewing certain portfolios and certain types of energy customers and mining customers — we won’t,” Cook said .

He said it’s part of his company’s commitment as a broker — and incumbent on the entire industry — to work with energy companies in this “cycle of change.”

In Australia, Cook said his brokerage firm works directly with “a number of mining companies, both coal and precious metals”. Along with third parties like Apex, he said BMS is supporting their ESG transition.

“We’re busy delivering [Australian mining companies] some of the lessons we’ve learned from around the world,” he said.

No quick fix

Cook said his company has managed to “change the mindset” but there is “no quick fix”.

An industry reality, Cook said, is that investing is often tied to ESG guidelines today, even more so now than it was 12 months ago.

“When looking for new investments, one of the questions that virtually every private equity house and sovereign wealth fund asks us as an organization is: What is our ESG policy? Can we demonstrate the progress we’ve made?” he said.

Cook said there are “tangible” benefits to adhering to ESG guidelines when looking for new investments.

“It’s going to happen more and more often,” he said. “There simply won’t be any investment firms around the world investing in companies unless they embrace and embrace this transition and can clearly demonstrate tangible changes and benefits.”

He said this was evident in BMS’s refinancing last year.

“When I’ve spoken to dozens of private equity houses, it’s absolutely on their agenda,” Cook said. “When you’re considering investing in any company: infrastructure, real estate, mining, energy, retail or whatever, it’s important to consider the ESG position of that particular asset.”

He said greenwashing doesn’t work because companies need to be clear about what they’re spending their capital on.

“It doesn’t matter whether it’s a mining company or a real estate company,” he said. “If these people don’t embrace, embrace and show progress, they’re going to struggle to find any form of new investment.”

Do you work in the energy sector? How do you see your role in relation to ESG and climate issues? Please tell us below.

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