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ESG and access to capital: Why insurers must stay focused on ratings

As ESG funds continue to grow their assets under management, insurers with sub-par ESG scores risk losing a key source of capital.

In brief

  • Insurers’ ESG scores improved in 2022, narrowing the gap with other industries, but overall results were mixed, with some prominent brands seeing declines. 
  • With slightly more transparency and new data and scoring criteria, rating methods improved, but still vary – often significantly – by agency and fund.
  • Given the fluidity of scores year-on-year and their impact on access to capital, insurers must actively monitor and continuously manage their ESG ratings. 

Amid the recent turbulence in equity markets, one trend has remained remarkably stable: capital continues to flow into environmental, social and governance (ESG) funds. The continued growth of these “green” and sustainable funds means insurers must actively monitor and promote their ESG ratings to retain full access to capital and manage the potential impacts on their stock price.

Without strong ESG scores, insurers are likely to be excluded from ESG funds and indices; and even above-average ESG rates don’t guarantee inclusion in the highest-profile sustainability funds. That’s why ESG ratings need to feature prominently on the agendas of senior leaders and boards. Indeed, ESG scores can be viewed as the “front window” into ESG strategies that go beyond baseline reporting.

In some cases, insurers have submitted applications for ESG scores before developing a cohesive ESG strategy. This is not an ideal approach, though the application and scoring process can provide a powerful catalyst for developing or refining strategies. We believe the pace of these actions needs to accelerate given increasing scrutiny from stakeholders into the strength and viability of insurers’ ESG strategies and how scores are manifested in policies. 

In 2021, EY conducted research that showed insurers lagged their peers in other industries in overall ESG ratings and inclusion in green funds. Our latest study, which updates our ESG ratings database, demonstrates how some insurers improved their scores during the last year, while others ceded ground. The implication is that insurers cannot assume a strong ESG rating one year will hold into the next scoring period. Given the volatility in scoring, the ongoing evolution of the ratings process (thanks to data improvements), and the lingering uncertainty about rating methodologies, even market leaders and respected global brands must attend carefully to their ESG scores. The fluidity in ESG scores is driven largely by the evolving standards for reporting, the improvements in underlying data sets, and a fractured market of data providers.

So, what can insurers do to protect or upgrade their scores? Direct engagement with rating agencies and fund companies can clarify scoring criteria. Creating and effectively communicating an “ESG story” – including core strategies, specific objectives and the metrics for tracking progress – with stakeholders is another priority. Lastly, senior executives should ensure that ESG teams are in place and sufficiently resourced to effectively oversee ESG application and scoring processes (e.g., evaluating and choosing ratings agencies, monitoring changes to ratings processes, tracking the evolution of data standards and handling submissions) on an ongoing basis.

This article, an update on last year's report, examines the current ESG rating landscape and provides recommended actions for insurers looking to convert higher scores into increased access to capital and, ultimately, stronger financial performance. 


Chapter 1

State of ESG funds and ratings, circa 2022

Though insurers improved their ESG scores, they must retain focus as data standards evolve.

Assets under management (AUM) in sustainable funds are growing at a 60%+ rate year-on-year and totaled $2.7 trillion at the end of 2021. While growth has slowed slightly in Europe, assets are concentrated there, and the rest of the world is still catching up.

Despite mounting macroeconomic and geopolitical challenges, sustainable funds outperformed traditional funds during the first half of 2022, with inflows of $120 billion versus outflows of $139 billion from traditional funds.¹

“Green” exchange-traded funds (ETFs) grew approximately 80% from 2020 to 2021, with increasing popularity in the US. New funds continue to enter the market, but fund discontinuations, once rare, became more common in 2022, due to difficult market conditions, strong competition, and increased scrutiny on “greenwashing.” This is an important development that we will continue to monitor.

Global sustainable fund flows and fund launches1

1: Excluding rebranded or repurposed funds

Sources: Morningstar Global Sustainable Fund Flows Q1-Q4 2021, Trackinsight, Global ESG ETF Data as of Dec 31, 2021

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1) The 1st chart focuses on sustainable fund flows which are going at a high rate.

2) The 2nd chart focuses on sustainable fund launches with more than 100 launching each year.

Global sustainable fund assets and global ESG ETF assets

Sources: Morningstar Global Sustainable Fund Flows Q1-Q4 2021, Trackinsight, Global ESG ETF Data as of Dec 31, 2021

Image description

3) The 3rd chart focuses on accumulated assets with the rest of the world slowing and developed regions catching up.

4) The 4th chart focuses on global ESG ETF assets which are increasingly popular and growing faster than the rest of the market.

Insurers improve their ESG scores

Today, 30 of the top 100 insurance firms are categorized as leaders in ESG rankings, up from 20 in 2020. A handful of outperformers are primarily responsible for this significant progress. But several notable firms saw their scores fall, largely due to perceptions that they dialled back commitments or communicated their ESG efforts ineffectively. A few well-known insurance brands were dropped altogether from important index funds. The implications:

  • Strong ratings one year do not automatically translate to the next year
  • Index inclusion is not guaranteed for any brand
  • ESG ratings are more fluid than many assumed. 

2020-21 S&P ESG scores

Note: Based on available data of top insurers by market capitalization, data as of 9 June 2022

Sources: S&P Global, EY-Parthenon Analysis

Image description

This chart illustrates global players who had changes to their S&P ESG scores during 2021, colour coded by the line of business.

Strong ratings are not forever and don’t guarantee index inclusion

Because sustainability ratings and scores change constantly, good progress in one year does not guarantee insurers will be included in key funds for the long term. These ups and downs in scores and ratings also impact inclusion into indices and cause changes in the weights by which players are represented. For example, the S&P DJSI added three firms and dropped three firms from 2020 to 2021. The newly included firms improved their ESG scores by 5-10% points, while those dropping out showed flat performance. What qualified as ESG leadership in 2020 did not necessarily make the grade in 2021. With higher ESG stakes all around and ratings agencies raising the bar, firms that are complacent about their scores risk being penalized.

Again, it is not enough to qualify once; raters are looking for continuous progress in sustainability efforts and advancement toward strategic ESG goals. Insurers that cannot demonstrate such progress will be excluded. The implication is that ESG ratings need to be proactively managed; the complexity of the reporting process alone necessitates fully dedicated teams. It’s neither a one-off project nor a part-time PR exercise. 

Looking at the other indices, including those from MSCI, the correlations between inclusion and ratings are less clear. For instance, some insurers improved their ESG scores but are still excluded, while sub-par performers have been included. That may reflect the use of more complex criteria, including bad press, which makes inclusion even more difficult to manage. The lack of certainty confirms the importance of proactive outreach to the ratings agencies. Such engagement is critical to gain transparency into ratings criteria, monitor year-on-year modifications to weightings, and ensure that rating agencies fully understand insurers’ ESG strategies.

Evolving data necessitates more transparency

Evolving reporting standards and shifts in underlying data sets is a primary driver of volatile ESG scores. The number of data providers also plays a role. Despite some consolidation and further discussion of standardisation, the main providers offer different coverage, assess companies from varying angles and use unique data sets, complementing their internal data with different sources. Insurers will need to consider which rating agencies are best to engage and which indices offer the most upside. Again, the complex application process requires full-time resources and a disciplined process, rather than ad-hoc approaches.

EY research has identified the emergence of a sustainability information ecosystem. As the transparency into scoring methodologies and composite indicators increases, sustainability data will become more valuable to insurers, investors and regulators. Such transparency will pave the way for the development of comparable and interoperable ESG scoring taxonomies and increased understanding among stakeholders as to the use or ESG data.   

The emerging sustainability information ecosystem

Source: Five priorities to build trust in ESG | EY - Global

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The diagrams shows how ESG ratings fit into the broader sustainability information landscape.

Insurance CEOs and investors must monitor different ratings agencies, despite the cost and time commitments, and seek to understand the nuances and subtleties associated with each rating system. The top ESG data providers are:

  • RepRisk: offers the broadest coverage by some margin and includes private company rankings, which can’t always be used for like-for-like comparisons.
  • MSCI and Sustainalytics: the provider most often cited by financial services firms, with clear advantages in general coverage; according to Bloomberg, MSCI earns roughly 40% of investor spend on ESG ratings data among more than 160 rating and data providers.²

S&P Global ESG Scores: follows a unique approach, based on a bottom-up scorecard methodology and a more analytical look at performance;³ Robeco’s CSA methodology – now integrated into S&P Global – has been referred to as the highest quality, but least transparent, approach for investment decision making.⁴

Most prominent ESG ratings agencies, by scoring and methodology, June 2022

ESG ratingsScoring criteriaMethodology based on

Bloomberg ESG scores

Out of 100

Public disclosures in CSR or sustainability reports, annual reports, websites, and other public sources, and through direct contact with companies; data covers 120 ESG indicators and companies, with penalties for missing data

Corporate Knights Global 100

A+ to D-1

Mostly public disclosures in financial filings, sustainability reports and websites; data covers 24 KPIs covering resource management, employee management, financial management, clean revenue and investment, and supplier performance

ISS ESG corporate rating

A+ to D-

A pool of over 800 indicators (approximately 90% are industry-specific) with a rating structure featuring different weights at the topic level and for each ESG pillar depending on industry

MSCI ESG ratings


Thousands of data points and 100+ specialised datasets (government, NGO, models), company disclosure (10-K, sustainability report, proxy report), 3,400+ media soruces across 3G ESG key ESG issues, focusing on the intersection between the core business and industry issues

RepRisk rating (RRR)

AAA to D

More than 100,000 public sources and stakeholders including print, online and social media, government bodies, regulators, think tanks, and newsletters, with a core research scope of 20 ESG issues that are board, comprehensive, and mutually-exclusive

ESG scores4


Three distinct environmental, social and governance issuer profile scores, updated from 2019 approach, indicating a view on the extent to which given issuers or transactions are exposed to ESG risks

CDP - The A list

A to F6

Three environmental factors (climate change, forests, water security) each with its own evaluation criteria and unique criteria based for different industries

Arabesque - S-Ray (ESG Score)

Out of 100

More than 250 reported metrics of company performance on financially material ESG issues, using only information that significantly explains future risk-adjusted performance; materiality is applied by overweighting features with higher materiality with quarterly rebalancing

FTSE Russel ESG ratings

0 - 5 (to 1 d.p.)

Pillar and theme exposures and scores from 200 individual indicators assessments that are applied to each company's unique circumstances and calculations that use an exposure-weighted average


1 Based on current range of rated companies

2 ESG Risk Rating, with a lower score indicating a better rating/lower ESG risk

3 Sustainable Fitch's ESG Rating Scale is expressed between one (highest) and five (lowest); it is derived from a more granular score between zero and 100, where 100 represents full alignment with ESG best practices

4  Moody's ESG scores are integrated into their credit rating/profile of covered companies

5  Moody's stand alone ESG rating scale is expressed between one (highest) and five (lowest), however note that Moody's ultimately rolls this score into a company's credit rating (ranging from AAA to C)

6  Rating scale is A to D- whereas an rating of 'F' indicated non-disclosure of required/requested information from the company being rated

Source: EY-Parthenon analysis

Because of the complexity of the space, most institutional investors (including asset managers, banks and insurers) rely on two to four providers.⁵ Further, more banks and asset managers are setting up internal ESG research teams review companies and to fill data gaps, with more than 50 operating an internal platform for proprietary data.⁶

In updating our database, we have used end-of-year 2021 funds data, and ratings and scores published from late 2021 until May 2022, which generally reflect the performance of the last closed financial year. As our research is motivated by ESG-themed index tracking funds, we focus on the providers behind some of the key indices driving these funds; we covered ESG scores from S&P and ESG ratings from MSCI, and index inclusion into the five key indices we identified last year.⁷


Chapter 2

Five implications from our research into ESG ratings

Well-defined ESG strategies and high-quality disclosures can help minimize greenwashing concerns.

1. Rising greenwashing concerns and political pushback could threaten future growth.

Macroeconomic turbulence and political blowback in the US have had only limited impact on ESG asset flows to date, but formidable barriers have emerged. Growing concerns about greenwashing and mis-selling (e.g., distributing ESG funds whose underlying investments are not aligned to better ESG outcomes) could threaten investor enthusiasm, as could closer scrutiny of ESG fund returns.

While long-term potential remains high, recent market trends confirm that a further slowdown in the rate of ESG fund growth is likely:

  • Morningstar reclassified more than 1,600 funds that qualify as sustainable under the Sustainable Finance Disclosure Regulation (SFDR), leading to the removal of £1.2 trillion in combined assets during 2021.⁸
  • A study by InfluenceMap found that 71% of nearly 600 ESG funds could not be validated for alignment with targets set by the Paris Agreement.⁹ Of 130 climate-themed funds, 55% had negative scores in terms of alignment to the Paris targets, including funds from some of the biggest asset managers.
  • One bank is investigating whether its asset management unit is mis-sold to investors by inappropriately citing green credentials.
  • Beyond environmental matters, controversies have resulted from the Russian invasion, with some ESG firms accused of taking “dirty” money or lending to regimes with poor human rights records.¹⁰
  • The returns of ESG investing have been more forcefully questioned of late, as traditional funds have benefited from rising oil prices and exclusions (e.g., defence industry investments) have been challenged.
  • In the US, Texas and Florida have banned certain ESG investments by state investment funds and pension managers, and the Supreme Court cut the Environmental Protection Agency’s ability to regulate emissions.

The bottom line is that insurers must monitor these developments in terms of both their investment portfolios and ESG strategies (e.g., ensuring green commitments are backed by meaningful action and investment).

2. Improved ESG scores show that insurers are taking ESG more seriously.

S&P ESG scores for the top 100 insurers showed a 5% improvement from 2021 to 2022, moving from 40 to 45. As a whole, the sector is still significantly behind the all-industry average score of 62 for the S&P 500. MSCI ratings distribution also improved, with insurers closing the gap to the all-industry average: 3% moved from laggards to average and 13% moved from average to leaders, compared to 3% and 7% respectively for firms across all industries. 

S&P ESG score: average scores out of 100 (%)

Note: data as of 11 May 2022

Sources: MSCI, S&P, EY-Parthenon Analysis

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These charts illustrates how the ESG performance of the insurance industry improved in 2021 and started to catch up with other industries. (S&P analysis)

MSCI ESG rating: distribution of ESG ratings by insurance sub-sector and for MSCI ACWI constituents (%)

Note: data as of 11 May 2022

Sources: MSCI, S&P, EY-Parthenon Analysis

Image description

The chart shows shares of “laggards” (C-B) (%) on the left and shares of “leaders” (AA-AAA) (%) on the right. These charts illustrates how the ESG performance of the insurance industry improved in 2021 and started to catch up with other industries. (MSCI analysis).

These improvements follow a year of significant activity. Multiple insurers published net-zero commitments and became signatories to the United Nations’ Principles for Responsible Investing (PRI) and Principles for Sustainable Insurance (PSI). Others deployed ESG committees and teams and communicated clear exclusion and transition polices.¹¹ The market, including ratings agencies, seems to have taken notice.

But against the backdrop of this positive momentum, the average performance of property and casualty (P&C) insurers deteriorated. Two P&C firms, out of the 28 in the index, slipped into the laggard category. These disappointing results could be a function of the intense pressure many carriers face from the impact of natural catastrophes and closer scrutiny of their policies by the media.

3. EMEA insurers lead while Asia-Pacific carriers catch up.

Insurers in Europe, the Middle East and Africa (EMEA) continue to lead on ESG, with steadily improving scores and the highest share of companies rated as leaders. However, Japan, Australia and Hong Kong all saw newly promoted leaders. Local regulations and disclosure requirements in the Asia-Pacific region, which are catching up with those in Europe, helped spark improved ESG scores. The promotion of ESG principles by more heavily regulated European asset managers and capital providers operating across Asia has also played a role.¹² These developments demonstrate that regulation is the most powerful accelerator of ESG strategies.

Chinese insurers still lag but are making progress. Only six are covered by rating agencies and those firms are struggling to break into the top category of MSCI’s rankings. Despite some improvement in average S&P scores, they nevertheless remain far behind their peers. The strongest candidate, Ping An, would still require a double-jump (from BBB to AA) to achieve leader status.

ESG ratings (MSCI 2020 — 2021)

Note: Based on available data of top insurers by market capitalization, data as of 9 June 2022; S&P Global ESG Scores are not available for companies with limited ESG information in the public domain, which impacts sample size.

Sources: MSCI, S&P Global, EY-Parthenon Analysis

Image description

This bar chart illustrates how insurance industry ESG performance improved in 2021 on a regional level (MSCI analysis).

ESG scores (S&P 2020 — 2021)

Note: Based on available data of top insurers by market capitalization, data as of 9 June 2022; S&P Global ESG Scores are not available for companies with limited ESG information in the public domain, which impacts sample size.

Sources: MSCI, S&P Global, EY-Parthenon Analysis

Image description

This bar chart illustrates how insurance industry ESG performance improved in 2021 on a regional level (S&P analysis).

There are concerns around developments in the Americas and in the US specifically. Regulations are fewer, less prescriptive and developing more slowly than those in the EU.¹³ The fragmented regulatory landscape in the US, with differences among states, adds further complication. Banks and asset managers find themselves caught in the middle of political polarization in the US, with “red-state” regulators seeking to ban those allocating assets into green funds and “blue-state” authorities seeking to ban brown assets from their investment portfolios. Until these tensions are resolved, ESG reporting will remain complex and expensive, and industry efforts to establish standards across multiple jurisdictions will be difficult and time-consuming.

4. Clear ESG strategies and high-quality disclosures are the key to improving ESG scores. 

By looking at last year’s biggest winners and losers in the MSCI and S&P indices, we can draw some conclusions about how insurers can improve and protect their rankings. Our analysis shows that clear communication around priorities and certain actions correlate with rising scores. The key moves include:

  • Retooling corporate governance in line with ESG commitments
  • Publishing ESG reports with more detailed information
  • Outlining principles for financial inclusion and responsible investing
  • Investing in human capital development

Interestingly, some insurers with improved S&P ESG scores in 2021 excelled mainly in the social and governance dimensions. Others made leaps based on environmental programs and commitments. Moving the needle in one area helps the overall score. The opposite is also true; poor data availability and weak public reporting on social and governance factors led to a dramatic decrease in the S&P rating of one prominent US-based insurer, despite its clear focus on the physical impact of climate change.

Rating agencies seem to be taking more holistic views and expect tangible action and detailed information on all three ESG fronts. The scoring process, which in years past was largely driven by “G,” has clearly evolved.

5. Lack of transparency and varying data standards invite greater regulatory scrutiny and standardization.

Significant divergence of ratings and scores remains a major issue for both investors and insurance CEOs. Some companies are rated at opposite ends of the scale by different agencies, and there are examples of divergent movements, thanks to varying interpretations of ESG performance. Because of the complexity of the issue, the situation has not improved much during the last year. 

Research¹⁴ into the divergence in ratings has found that rating providers typically:

  • Select varying sets of attributes (scope)
  • Adopt different measurement methodologies
  • Assign different weights when determining ESG ratings

While the adoption of a common taxonomy will enable better control over scope-induced differences, the biggest driver of divergence is how certain attributes are measured based on available indicators. Because of the difficulty in fixing those measures, the divergence lingers.¹⁵ While weight difference is easier to address, it is also a moving target, as agencies are evolving their methodologies to make them more sector-specific.

Our research revealed specific variances, including:

  • Changes to weightings: The environmental dimension gained 6% points in 2022 through the addition of decarbonization strategies as a new component; the governance dimensions received less weighting
  • New questions: Compared to previous questionnaires, several questions were added or reformulated, for example in Climate Risk Adaptation (CRA) or Workforce Management criteria

Data underlies every ESG rating methodology and the ESG data market keeps maturing. Self-reported data is now under more scrutiny, largely due to the risk of greenwashing. There is plenty of room for regulators to enforce standardized ESG metrics and for companies to improve their disclosure practices. The World Economic Forum, in collaboration with EY and the other Big Four accountancies, has developed a set of universal ESG metrics aimed at improving non-financial disclosures.¹⁶

The transparency of agencies is another pain point for both investors and regulators. A recent publication from the European Securities and Market Authority (ESMA) concluded that there is insufficient transparency on ESG considerations by credit rating agencies,¹⁷ as disclosures differed significantly across rating agencies and ESG factors.

Regulation needs to evolve in ways that allow for unique methodologies but also protect investors by increasing transparency. The International Regulatory Strategy Group (IRSG) has identified potential conflicts of interest and how payment structures can be revised to address these issues. ESMA is currently investigating the use of ESG ratings by market participants and consulting with market stakeholders on how the market functions today.¹⁸

In general, regulatory oversight is expected to increase. In fact, ESG legislation progressed in 2022 in Europe, the US and the UK. Ideally, different countries and jurisdictions will take a harmonized approach, applying consistent taxonomies globally and adopting similar principles with room for regional tailoring.¹⁹ 


Chapter 3

Next steps: Five ways insurers can improve ESG scores

Insurers must be diligent in defining strategies, communicating progress and maintaining ESG score.

With all the ESG activity and evolution during the last year, index inclusion and analyst recommendations based on agency ratings remain crucial drivers of share price, thanks to rising demand from sustainability-focused investors. After the industry made solid progress in the last year, pressure is mounting on laggards to catch up and on leaders to sustain strong ESG performance.

The year-on-year variations in ratings also reinforce the importance of continuous monitoring and active management of ESG ratings. Index inclusion is not guaranteed, not even for the biggest brands or those with strong ESG scores; representation percentages across indices are fluid, resulting in some companies being dropped from funds and indices despite relatively strong ESG scores. Thus, insurers looking to improve their performance (or perceptions of their performance) should consider adopting a number of leading practices:

  1. Ensure that ESG ratings are supported by a cohesive ESG strategy, with full traceability through business lines and performance metrics.
  2. Communicate the ESG strategy consistently and frequently via annual reports, quarterly performance updates and analyst briefings. Persuasive narratives should be aligned to the needs and interests of different external groups, including the general public and the media.
  3. Create a dedicated ESG metrics monitoring and reporting team, with full-time resources dedicated to managing the ESG scoring process, tending to relationships with ratings agencies, and tracking how ESG scores apply to broader analyst ratings, index inclusion and fund/ETF participation. Based on senior-level sponsorship and multi-disciplinary skills, the team should aim to stay ahead of intensifying scrutiny from investors, regulators and other market stakeholders.
  4. Reinforce board and C-suite ownership and commitment to setting and driving the ESG agenda and confirm its priority in corporate purpose, resource allocation and decision making.
  5. Participate in industry efforts to standardize ratings criteria and taxonomies, disclosure requirements and oversight of ratings providers.

Our ongoing engagement with the market around ESG issues and opportunities, as well as our analysis of the available data, lead us to conclude that there is a correlation between ratings, inclusion in ESG indices, the ESG funds that are based on these indices and, ultimately, insurers’ stock prices. The ratings process is still evolving and is characterized by inconsistencies among the major ratings agencies, requiring choice and active management of the investor community.

Still, firms that fall behind – or are perceived to be falling behind – are likely to be punished by the market, with their pool of available investors shrinking over time. That means ESG ratings and index inclusion need to be critical near-term topics for the C-suite and boards, which must craft a cohesive ESG strategy, develop the right KPIs and share a clear storyline about their achievements to different stakeholders, including analysts, rating agencies and investors.

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    In updating the EY ESG Ratings database, we discovered fluctuating year-on-year scores, ever-evolving data standards and continuously increasing asset flows into ESG and sustainable funds. For insurers, that means they must rigorously and proactively manage their ESG scores if they are to retain full access to capital and protect their share price.

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