ESG goes mainstream and Bermuda is embracing it

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Pat Phillip-Fairn, CEO of Objective Consulting

By Sam Strangeways

Not so long ago it was viewed by many in the corporate world as a faddish buzzword, but ESG is now a mainstream concept – and businesses in Bermuda are having to embrace it.

Increasingly, firms here are developing and honing their sustainability policies, reflecting deeply on how to be good corporate citizens and sharing their commitments and goals publicly.

They are doing so because their investors, their clients and even their own staff are demanding it – and soon it will likely be a regulatory requirement.

“ESG is definitely more pervasive now and also multi-dimensional in scope and corporate strategy,” said Pat Phillip-Fairn, CEO of Objective Consulting, which helps firms communicate their ESG strategies.
“I think the growth in strategic focus and operational practices related to ESG has evolved directly in line with societal concerns and expectations around issues of sustainability, social equity and responsible corporate behaviour.”

ESG refers to environmental, social and governance metrics which investors can scrutinise to better understand a company’s performance in those non-financial areas.

Kevin Dallas, group head of marketing and communications at Butterfield Group, said such issues had long been of importance in business.But he added: “What is new or more recent is the need to wrap that holistically into an ESG framework and to be able to articulate it and the progress we are making to stakeholders.”

Stephen Weinstein, chairman of the Bermuda Business Development Agency, told the recent Island Finance Forum that public companies were “hearing ESG pressure from a growing constellation of stakeholders”. He said: “Importantly, your team – human capital – is increasingly focused on this topic but your investors, your customers, your stakeholders, the governments with which you deal, want to know about your ESG strategy.

“They want to see that it’s aligned with your own medium and long-term sustainability as a firm and aligned with their values.”
Ms Phillip-Fairn said entities in Bermuda had “certainly been increasingly focused on ESG in recent years”. “That applies right across the IB sector, accounting and law firms, in regulation via the BMA and even the BSX,” she said.

“From what I’ve seen there’s a general recognition that implementing ESG policies effectively and realistically is beneficial for businesses, the community and ultimately the jurisdiction’s credibility and leadership position.”

Mr Dallas said the E in ESG had become “much more prominent” since the 2016 Paris Agreement on climate change. “There is much more scrutiny over what’s happening in the E space,” he said.

Butterfield, which has been giving out college scholarships since 1978, has recently looked close to home to make an impact in that area. For the last several years, it has offered a graduate scholarship for environmental studies.

“That’s an investment in the community that we believe has a long-term pay off,” said Mr Dallas. “We are making sure that the communities in which we operate have the right capabilities to thrive in the future.”

RenaissanceRe president and CEO Kevin O’Donnell wrote in his 2020 letter to shareholders that the company focused on ESG issues “because they advance our business goals and are the right thing to do”. The firm published an ESG strategy which formally committed to helping the world “better manage climate risk” with green projects in Sierre Leone, Uganda and Chile.

Ms Phillip-Fairn said the evolution and growth of ESG had “occurred in the context of major economic shocks such as the global financial crisis, increasingly alarming climate change impacts, social inequality, imbalanced access to opportunity among minorities, and so forth”. She said: “Undoubtedly, companies also recognise the risks and uncertainty for their businesses from any instability that such issues can generate in their markets.”

Mr Dallas noted that shareholders didn’t only consider ESG from a philanthropic perspective. “They ask if we have considered the impact of climate change on our business,” he said. “An example would be that climate change is causing an increased frequency of hurricanes and a higher intensity of hurricanes. How does that impact Bermuda’s coastal shoreline and the houses built along it, many of them purchased with mortgages from Butterfield?

“Our shareholders want to know that our lending policies appropriately consider the risks of climate change in Bermuda.”
As ESG continues to gain momentum around the world – and regulators begin mandating disclosures – the topic looks set to remain centre-stage in Bermuda.

Last month, the importance of ESG strategies was discussed by a panel at the Bermuda Captive Conference. And in April, the BDA said it would prioritise efforts to establish and promote Bermuda as the world’s climate risk finance capital, highlighting how the island enjoyed a “rare perspective on climate-related efforts, as the country is a critical habitat for marine biodiversity while also serving as a key player on the global stage of financial risk management”.

Ms Phillip-Fairn said: “Ultimately most companies are in business to be profitable, so that objective remains paramount.
“However, I think it’s fair to say the definite shift we’ve seen towards providing more transparency in this area, and demonstrating a firm is implementing authentic ESG initiatives with long-term positive impact, will be a priority for companies as long as those issues remain important to their investors – institutional and individual, customers, other stakeholders and regulators.”

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