Rating “social” within the EU law the ESG factors : relevance for the insurance industry and the risk of “social washing”

Abstract

The expression “environmental, social, and governance” (ESG) was coined in the first “Who Cares Wins” Report in the year 2004. The report provided several recommendations for integrating ESG aspects in asset management, securities brokerage services, and the associated buy-side and sell-side research functions. The term “ESG” throughout that report “is a way of highlighting the fact that these areas are closely inter-linked”, but the term is not provided with any definition. The United Nations Principles for Responsible Investment (PRI) includes a list of examples, but no explicit definition was set for each component of ESG. This uncertainty is inevitably reflected in the perception and subsequent application of these factors. The continuing regulatory uncertainties are an obstacle to the progressive alignment of the recipients of these provisions towards the objectives pursued with the introduction of ESG. This uncertainty leaves wide margins for discretion, which risks frustrating these objectives. [excerpt]