Too often, companies are locked into firefighting today’s problems while leaving tomorrow’s threats to fester. From property damage and flooding to environmental clean-up costs and lawsuits from investors or third-party suppliers, the tangible risks that come from deprioritizing climate and sustainability actions are wide-ranging and costly.
Despite this, a recent survey by Beazley found that nearly three in four (73%) of global executives believe that the current economic climate is making meeting their sustainability targets less of a priority.
Paul Bantick (pictured), chief underwriting officer at Beazley, addressed the disconnect in an interview with Insurance Business. “Firms are understandably focused on economic uncertainty and short-term issues,” he said. “There is so much going on in the world, and it can be difficult to know where to focus, especially when climate risk can feel too big to tackle.”
Only 20% of global leaders rank climate and catastrophic risks as a top concern, according to Beazley’s latest report. That figure suggests a serious underestimation of long-term exposure, according to Bantick.
The Beazley CUO noted that property, business interruption, environmental liability and D&O risks will increase for firms that don’t have appropriate extreme weather risk mitigation plans in place, and businesses that delay action today could be paying dearly tomorrow.
“Once considered black-swan events, extreme weather is increasingly becoming the norm and the impact is wide-ranging,” said Bantick. “(Business leaders) can’t afford to ignore or underestimate climate exposures. Now is the time to start thinking about investing in resilience, understanding exposures and planning for business continuity.”
One particularly sharp disconnect is around the global energy transition itself. While momentum for decarbonization has been building, only 21% of executives rank energy transition risk as a priority in the Beazley survey. Bantick believes the lack of clear alternatives in key sectors like marine energy is part of the problem.
“The transition towards net-zero emissions for the marine industry is complex, requiring significant investment and long timelines, limiting flexibility,” Bantick pointed out. “Various alternative fuels like LNG, bioethanol, and blue ammonia are being tested, but no clear winner has emerged.”
The energy transition also demands extensive changes to infrastructure, supply chains, significant investment, and, in some cases, will result in stranded assets for businesses. With current economic uncertainties making it challenging for businesses to look beyond the here and now, it makes sense that energy transition is not at the top of the agenda for many.
“With 67% of executives telling us that they are currently finding it difficult to transition to non-carbon energy sources and meet their net-zero targets, it’s clear that further support is needed,” said Bantick.
Climate policy shifts in the US may also be key to this puzzle. President Donald Trump has intensified efforts to reshape environmental policy, emphasizing fossil fuel development and dismantling existing climate protections.
One of his administration's prominent actions includes a series of executive orders aimed at revitalizing the coal industry and promoting America’s energy independence. These orders designate coal as a "critical mineral," expedite coal leasing on federal lands, and propose using coal power to meet the escalating energy demands of data centers driven by artificial intelligence growth.
Trump has also moved to reduce environmental regulations. The Environmental Protection Agency (EPA) has been directed to review and potentially rescind regulations aimed at reducing greenhouse gas emissions, including the Clean Power Plan established during the Obama administration.
Despite these movements, Bantick cautioned businesses against straying from their climate targets. “As regulations diverge, many global businesses may be waiting for the dust to settle and see what the legal landscape will look like,” he said.
“But as regulations become more stringent in some regions, business leaders can’t afford to sit on the fence. It is imperative that they take a long-term view and integrate climate considerations into their core business strategy.”
Environmental, social and governance (ESG) regulations are expanding across many jurisdictions worldwide, but regulatory risk isn’t climbing the executive agenda. In fact, concern is slipping: only 19% of leaders surveyed by Beazley listed failure to comply with ESG requirements as a top concern, down from 22% the previous year.
A shift in mindset is essential if businesses want to build true resilience. It starts with asking uncomfortable but necessary questions about inventory, global footprint, and supply chain, said Bantick.
Some companies are trying to thread the needle, searching for strategies that maintain economic stability without abandoning sustainability altogether. But Bantick doesn’t see those as mutually exclusive goals. “Being an economically stable business and being a sustainable business often is one and the same,” he said. “Understanding climate risks creates long-term value for a firm’s stakeholders.”
Insurance, too, has a larger role to play than many businesses realize. With deep data reserves and a front-row seat to global risk, insurers can be pivotal partners in this balancing act. Companies need access to scenario modelling, risk projections, and long-term planning frameworks that help them visualize the threats they might otherwise ignore, and the insurance industry is evolving to meet that demand.
“Access to risk scenario analysis and medium-to-long term planning tools will help firms to make informed decisions,” said Bantick. “By leveraging data, new insurance and risk mitigation solutions can be developed to support a more sustainable future for firms.”
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