How we determine materiality
A key question for any company that seeks to take a long-term view and enable sustainable progress is what this means in the context of its own business and industry: which topics are “material” to achieving this goal?
In order to identify the most material sustainability issues, we use both our internal risk expertise and ongoing dialogue with our stakeholders.
Insights from our internal risk expertise
As a leading re/insurer, we act as ultimate risk taker in society. This requires us to have a very sound understanding of the risk landscape. This deep understanding of re/insurance markets and the risk expertise embedded in our company also provide us with a solid foundation to identify material sustainability issues. In many areas of our business, we have special teams, functions and processes to identify and address issues relevant to sustainable development.
In our core re/insurance business, we have special units, such as our Global Partnerships function in the Group or the Environmental & Commodity Markets department in our Corporate Solutions Business Unit, that identify underinsured markets and risks, and seek to expand re/insurance protection through commercially viable solutions.
In our risk management, meanwhile, we have a process and the capabilities to identify risks we feel we should not re/insure, be it for ethical reasons, because they might lead to losses, or both. We conduct this analysis through our Sustainability Risk Framework and other tailor-made risk management tools.
We also have a formal process to identify emerging risks, called SONAR (“Systematic observation of notions associated with risk”). This enables us to spot, at an early stage, newly developing or changing risks that may have an impact on our business, including risks related to environmental, social and governance (ESG) issues.
Insights from dialogue with our stakeholders
Being an ultimate risk-taker in society, we have an intrinsic interest in maintaining active and ongoing dialogue with our key stakeholders. Generally speaking, this dialogue works in both directions: our partners expect us to share our risk expertise, thus helping them – and society at large – to form effective responses. In turn, we benefit from this exchange to sharpen our understanding of key risk, including ESG issues, and to set priorities.
With regard to sustainability issues, our principal stakeholders are:
- Financial community: sustainability investors/shareholders, rating agencies, shareholder associations and stock exchanges in addressing sustainability concerns;
- Clients: Cedents, brokers and corporate clients;
- Political and legal entities: Multilateral organisations (UN), governments, regulators, standard-setting boards;
- Civil society: general public, NGOs, media, academia.
The Centre for Global Dialogue near Zurich is our own in-house conference centre. Providing us with a tailor-made dialogue platform, it allows us to actively manage and encourage collaboration with our stakeholders. In 2015, we held or hosted approximately 120 stakeholder events at the Centre. Our publications form a second important element of our stakeholder dialogue: in 2015, we published more than 20 new expertise publications and around 30 new fact sheets.
Complementing the insights we gain directly through dialogue with our stakeholders, we also utilise data provided by third-party organisations such as RepRisk, Sigwatch, MSCI and Sustainalytics, and the results of acacemic research.
Our process to identify material issues
When identifying material ESG issues, we both use our internal, embedded risk expertise and the insights we gain from our stakeholder dialogue. In addition, we also take into account the views of various standard setters on materiality, eg: reporting requirements, materiality definitions by sustainability rating agencies, multilateral discussions such as the UN Sustainable Development Goals, relevant academic research and regulatory developments.
To process the resulting information from these three key sources we use a process with the following steps:
- Expert analysis by our Group Sustainability Risk unit;
- Interviews with key internal decision makers, our sustainability risk stakeholders (eg investor meetings, events at the Centre for Global Dialogue, project and business related interactions) and external experts (academia, NGOs, consulting firms);
- Validation of final topics by the Group Sustainability Risk unit;
- Approval and endorsement by the Risk Management ET, Group Executive Committee, Board of Directors;
- List of material topics finalised by Group Sustainability Risk unit;
- Development/adjustment of sustainability strategy based on final materiality map.