ESG related risks becoming the global concern in the corporate world

 


 Environmental, social and governance related risks are becoming a great concern in the corporate world globally. In Kenya financial sector stability report published on 9th October 2023 on the Central Bank of Kenya website clearly points out climate change as one of the main cause of unpredictable financial stability. The report on financial sector development and risk under SACCO section the regulator points out ESG risk as a major concern of the SACCOs and Banks. "SACCOs and Banks are increasingly being exposed to environmental risks such as climate change. The Agro-based SACCOs are prone to unconducive climatic conditions, with loans to household spent majorly on health care and education. In addition, the SACCOs and Banks business model affects social and a poverty outcome in the society. As a result, there is need to incorporate environmental, social and governance (ESG) best practices  business to reduce exposure to ESG risks. In 2021 Central Bank of Kenya directed Banks to incorporate ESG in their business models by june 2022 . Therefore, sustainable business model should incorporate environmental and social impact of mobilising deposit and lending to the society. " 


1. Do your firm prepare sustainability reports ?

2. In most of firms MOTTO, VISION AND MISSION , they talk about transforming  economically and socially or social-economically if you like , is this featured in reality (social)?

 # ESG as a measure of sustainability risk


By Mutharimi Phineas

(CEO, The Kenyactuary)

 


Comments

Anonymous said…
Good work you are doing over here
8 January 2024 at 11:36
Post a Comment

Popular posts from this blog

Phin's theory of 'volatility' as a potential measure of sustainability: An ESG,CAPM oriented Approach

Image
INTRODUCTION  As environmental, social, and governance (ESG) factors continue to gain prominence in the corporate world where risk keeps on evolving, their role as a indirect potential critical measure of sustainability risk should also be recognized, meaning that where ESG is mentioned then sustainability falls a victim also. The concept of ESG started back in the mid-2000, though; the principles behind ESG are decade or centuries old. A 2004 report from the United Nations titled who cares wins carried what is widely considered the first mention of ESG in the modern context. Sustainability risk is an unforeseen situation that affects a company financially and reputation when it fails to effectively address ESG principles. Recently, climate risk which is a “E” category have become the talk of the world. The “S” category which comprises of the relationship between the companies with employees, customers, community among othe...
Read more

Modelling claim reserves using 'inflated' Basic Chain Ladder Method

Image
Most of the Actuarial analyst they don't feature in the inflation aspect while using this method, I get the reason, reserve overestimation!!! Most probably yeah. Kenyactuary  modified the calculation of the development factors such that instead of using weighted average a method which incorporates inflation aspect is used in the code part.  INTRODUCTION Risk is a complex issue that cannot be merely estimated without having to think about loss critically as a  random variable whereby in case of a loss then it can be ‘catastrophic’. The only solution one would opt for is to transfer the same risk to another entity. The role of transferring risk is played by insurance companies through an individual buying an insurance policy whereby the individual will pay periodic payments called premiums, upon loss the insured (individual) will be indemnified by the insurer (insurance company). An insurance policy is a contract, usually written, between an insurer and the insured which la...
Read more

Insurance penetration in Kenya

Image
Outlook: Unlike its close cousin, banking, insurance industry in Kenya still has a relatively low market penetration rate. As of 2023, Kenya’s insurance penetration rate stood at 2.3%, according to data by KNBS. Though ahead of its East African neighbors, Kenya still lags behind the regional leader, South Africa, which boasts of an insurance penetration rate of about 10%. The recent Insurance Outlook Report 2024 by Delloite shows a steady growth in both the gross written premiums and return of equity for life insurance market in the post-COVID era. This is positive trend is expected to boost investor confidence in this segment. For the general Insurance, the gross written premiums has also shown a continued increase since 2015. Despite this, there has been a sustained decrease in return on equity meaning that investors are not getting enough bang for their buck in the general insurance. This negative trend has been attributed to fraud in claims and significantly low premium growth ...
Read more