6 June 2023Analysis

Marsh: companies with captives have higher ESG scores

Companies with a captive have higher than average ESG Risk Rating scores, according to analysis by broker Marsh.

In a new article published on Marsh’s website, the company said that companies with captives are in a good position to showcase how their existing processes and protocols feed into their ESG risk mitigation and management.

Marsh launched its ESG Risk Rating in March 2022 after it recognised that a wide array of internal and external stakeholders are basing their decisions on Environmental, Social, and Governance factors. It is a complimentary self-assessment that enables clients to measure their organization’s environmental, social, and governance performance, understand their ESG risk profiles, and gain access to risk and insurance benefits.

“As more companies use the tool, the trends and correlations from the insights given are becoming more evident,” said Marsh. “We are finding potentially significant relationships in the data relevant to the management and mitigation of risk. For example, in October 2022, we were able to show that organizations with stronger social performance experience better claims performance for workers’ compensation. Now, we are seeing early signs of a positive correlation between companies with captives and their ESG rating – and here we take a deeper dive into this finding.

“Many leaders are exploring alternative strategies to finance their risk to counter the higher insurance rates, lack of capacity, and more stringent carrier terms and conditions they are experiencing. One of the most popular is through a captive insurance company.”

Marsh said that when it started its analysis it’s expectation was that companies with captives would have higher ESG scores as they tend to be more proactive in their risk management. Marsh expected this to especially be the case for the ‘G’ component.

The Marsh analysis was based on data from over 100 large companies, being those with a revenue of $1 billion or more. Marsh’s results did find a correlation, it found that companies with captives had higher average ESG Risk Rating scores than those without. However, the broker was surprised that the strongest statistical significance was found in the ‘S’ component, specifically within the themes of clients & customers and employment & wealth generation.

To read the March analysis click here.