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ERM Fundamentals

Enhancing Risk Insights by Integrating ESG Perspectives

With expectations related to the management of environmental, social, and governance challenges (referred to as ESG) rapidly evolving, the management of ESG related risk challenges is becoming critically important to most organizations. Unfortunately, the emphasis on risk identification and assessment led by many ERM program leaders may not be sufficiently integrated with the organization’s emphasis on ESG related challenges. That lack of integration may lead to significant missed opportunities and risks and possibly unneeded incremental efforts for both ERM and ESG efforts.

Adding Value by Integrating ERM and ESG

This thought paper, Enhancing Risk Insights by Integrating ESG Perspectives: An Opportunity for ERM Leaders, is intended to help ERM leaders and other executives enhance their organization’s risk insights by strengthening the integration of their ERM and ESG efforts. The paper is based on interviews with ERM leaders who shared insights not only about challenges related to integrating ESG into their ERM processes but also suggestions of a number of opportunities leaders can consider to reap the benefits that can be realized through enhanced ESG considerations.

Challenges When Assessing ESG Risks

As Chief Risk Officers (CROs) and other ERM leaders strive to help advance their organization’s focus on ESG related risks, they face a number of hurdles that can limit their ERM program’s integration of ESG risk thinking into their broader risk management discussions and oversight.

The paper identifies a number of challenges that currently make the integration of ERM and ESG difficult for organizations, which include the following:

  • Wide variations in ESG’s meaning
  • Lots of voices with fast-changing expectations
  • Lack of coordinated, clear leadership
  • Different time horizons
  • Lack of strategic value
  • Lack of trust in information provided

Opportunities to Strengthen ESG Risk Insights

The benefits of strengthening the integration of ESG considerations with the organization’s ongoing ERM efforts can be realized by taking proactive steps to navigate around barriers that may currently be limiting the organization’s strategic focus on ESG risks and opportunities.

There are several action steps that ERM leaders may want to consider to strengthen their organization’s ability to recognize and respond to issues related to ESG. These opportunities center around these five themes:

  1. Invest in learning about evolving ESG expectations
  2. Network with key players
  3. Use strategic lens to integrate ERM and ESG risks
  4. Seek to strengthen C-suite and board engagement
  5. Make the focus value adding

The paper includes over 20 specific action steps ERM leaders can consider along these five themes.

Templates and Tools

The paper includes several tools and templates that ERM leaders can use to advance the integration of ERM and ESG.

Webinar on ERM and ESG

Join us for our July 26, 2023 virtual webinar (1:00 – 4:00 pm Eastern) that will focus on the ERM and ESG integration opportunities. Register here.