Many entities within the increasingly left-leaning Corporate America, including much of the insurance industry, have embraced what are known as “ESG” standards and now consider as critical factors the environmental, social, and governance impact of their actions and investments when making decisions.
Republicans stand generally opposed to the growing ESG movement, particularly within the insurance industry, and now at least three GOP-led states are taking legislative action to reverse that trend, the Washington Examiner reported.
Part of the reason why Republicans are opposed to the progressive ESG movement, aside from the ideological constraints it places on the broader economy, is its close relationship with the even more pernicious “diversity, equity, and inclusion” movement pushed by the left.
In fact, those “DEI” factors are a fundamental aspect of the social pillar of the ESG triad that has come to dominate much of Corporate America.
Prohibiting insurers from considering ESG as factors
Politico reported Tuesday that lawmakers in three predominately red — Texas, North Dakota, and South Dakota — have recently filed what the outlet described as “anti-ESG” legislation that are specifically aimed at the insurance industry.
What those bills would do if passed into law is prohibit insurance companies in the respective states from considering the three ESG factors when writing policies, setting rates, or making investment decisions.
The Republican lawmakers behind those bills argue that the ESG factors are generally immaterial to the bottom line of a company and its shareholders and are harmful and discriminatory toward consumers and other companies, and instead is little more than blatant political calculations intended to pander to the progressive left.
ESG already deeply embedded in insurance industry
Unfortunately, those Republican lawmakers are fighting a steeply uphill battle in the effort to purge ESG from the insurance industry, as the movement has become deeply entrenched in that particular sector, according to a report on the “growing sense of urgency” regarding ESG from industry website PwC.
That report detailed how the ESG criteria was “inextricably linked” to the insurance industry’s mission of “mutualizing and managing risks,” and cited the results of a survey that showed clear and significant majorities of global insurers were focused intently on numerous ESG-related factors.
However, that doesn’t necessarily mean that all insurers are devoted true believers of ESG, as the PwC report also noted that many insurers were taking action on those factors in order to be in compliance with new regulatory requirements imposed by the federal Securities and Exchange Commission on climate disclosure as well as similar framework standards established by the international Task Force on Climate-Related Financial Disclosures.
Which is more confusing and destablizing to the industry?
Michel Leonared, a chief economist and data scientist with the Insurance Information Institute, told Politico, “ESG is in the DNA of any insurance company,” and further noted, “It would be very difficult for the insurance industry to insure in an economically viable and sustainable way without paying attention to environmental patterns.”
“Do we find it chilling when we see these laws? Well, we find it confusing,” he added with regard to the proposed anti-ESG laws. That confusion “could turn very rapidly to severe significant concerns” if the bills are passed into law, and “Then we would be wondering whether we can even keep insuring in some of those markets.”
Of course, that is not at all what Republicans aim to do with their legislation, and some would argue that the ESG standards and requirements have already thrown the insurance industry and many others into an unstable and reactive state of confusion.
Texas state Rep. Tom Oliverson, who filed legislation that would bar insurers from considering ESG or DEI standards and scores when setting rates or writing policies, told Politico, “We don’t want to destabilize the entirety of the insurance industry by injecting a bunch of non-actuarially sound principles.”