Background
The National Insurance Commission (NIC) has issued environmental, social and governance (ESG) guidelines (ESG Guidelines) for insurers and reinsurers. The ESG Guidelines, which took effect in December 2024, are intended to guide insurers and reinsurers in managing ESG-related risks by integrating ESG-related risk management into their business decisions and activities. The guidelines also provide risk and sustainability tracking requirements.
The ESG considerations under the guidelines include climate change, greenhouse gas emissions, air and water pollution, biodiversity, deforestation, energy efficiency, waste management, data protection and privacy, gender and diversity, community relations, human rights and labour standards, cybersecurity, board composition, bribery and corruption, whistleblowing, and lobbying.
Key requirements
The key ESG requirements under the guidelines are as follows:
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Required action |
Details of requirement |
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General ESG principles |
An insurer or reinsurer must consider the following general principles:
(a) environmental stewardship – the impact of its business activities and operations on the natural environment. Key considerations include sustainable underwriting, climate change and resource use, and carbon footprint reduction; (b) social responsibility – the impact of its business activities and operations on society. Key considerations are diversity and inclusion, community engagement, customer welfare, human rights and labour standards, and financial inclusion; (c) governance standards – governance factors relating to the management and oversight of its business. Key considerations are ethical conduct and compliance, risk management, stakeholder engagement corporate governance structures, and board oversight; (d) materiality assessments – focus on materiality assessments to identify and prioritise ESG factors that may potentially and materially affect its business, financial performance and long-term sustainability; and (e) responsible investment – ESG factors in investment decisions. Key considerations are incorporating ESG criteria into investment analysis and portfolio construction and considering impact investing. |
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Specific ESG principles |
An insurer or reinsurer must consider the following specific principles: (a) ESG governance – the board of directors must consider ESG-related risks when developing the overall business strategy, objectives and risk management framework and also exercise effective oversight on implementation; (b) ESG management system – implement ESG management systems and provide necessary resources and support for ESG integration; (c) ESG risk management – implement adequate mechanisms to assess level of ESG integration for the business and report all relevant ESG risks to the senior management and board of directors; and (d) Stress testing and scenario analyses – develop internal capabilities to conduct scenario analyses and stress testing on ESG related issues. The outcomes of stress testing and scenario analyses must be submitted to the NIC on an annual basis. |
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Reporting and disclosure requirements |
An insurer or reinsurer must, among others, disclose in its annual financial statements its approach to managing ESG in a way that is clear and useful to stakeholders, establish a process for regular review and update to its reporting practices, and ensure that its reporting addresses environmental impact, governance practices, and social practices. |
Non-compliance
Although no sanctions have been expressly stated in the ESG Guidelines for non-compliance with the ESG Guidelines, section 201 of the Insurance Act, 2021 (Act 1061) (Insurance Act) allows the NIC to assess any non-compliance with guidelines issued by the NIC and determine whether it constitutes a breach of a provision of the Insurance Act and apply the relevant sanctions in the Insurance Act.
Conclusion
The ESG Guidelines is a welcome addition to the developing body of sustainable finance initiatives in Ghana’s financial services sector and it is expected that the effective implementation of the guidelines will strengthen Ghana’s ESG credentials and make the insurance sector more attractive for foreign direct investment.
