A new survey by Co-operators has shed light on Canadians’ perceptions about environmental, social, and governance (ESG) priorities in the financial services industry.
In a national online survey of 1,500 Canadian adults, three-quarters (75%) said they believe that organizations bear a responsibility to act sustainably and mitigate climate change impacts. However, only 35% perceived the financial industry as genuinely caring about sustainability.
The stark contrast could present an opportunity for insurance companies to step up their commitment to sustainability while at the same time guiding and educating customers on making sustainable choices.
“The survey is unsurprising in the sense that it’s only recently in the financial services and insurance industries that ESG and sustainability have been a topic of conversation,” said Jessica Baker (pictured), executive vice president of wealth at Co-operators.
“But in light of things happening worldwide, sustainability and ESG investments are something that more Canadians are aware of. I think the insurance industry is a great place to help educate clients.”
The survey’s results suggest that many Canadians harbour skepticism about whether insurance and financial services companies are genuinely committed to sustainable practices.
It also revealed a knowledge gap, with only a quarter (26%) of Canadians saying they know how to access information about organizations’ environmental, social and governance (ESG) performance.
Baker emphasized the timeliness of discussions surrounding ESG, especially amid this month’s COP28 global climate talks in Dubai.
“Financial results are often the number-one headline in our industry,” said Baker. “This survey aligns with the fact that many Canadians care about sustainability and are unsure that their insurance or financial services company does.”
According to Baker, one of the primary obligations is to simplify the understanding of complex products, including ESG and sustainable investments. Educating insurance customers on the meaning and implications of sustainable practices is crucial for building trust and transparency.
She also stressed that consumers are increasingly looking for evidence of a genuine commitment to sustainability, wary of the possibility of greenwashing.
The best way to combat this is by openly sharing and communicating an organization’s principles and investments, clearly demonstrating their alignment with sustainable practices.
“One the biggest obligations we have as a licensed insurance representative is explaining the coverage that people are buying and how it indemnifies them at the time of claim,” Baker said. “I think another thing that Canadians are looking for is [whether] the claim of sustainability or ESG is legitimate.
“Is there an actual honest and transparent alignment of an organization’s sustainable practices and values-based principles and the investments and opportunities they present their clients?”
The rising cost-of-living, inflation, and interest rates have been found to be critical factors deterring Canadians from engaging with sustainable companies.
Over half of respondents in the Co-operators survey expressed interest in buying products from “greener” firms before rising inflation, living costs and interest rates "made things too expensive."
“When you think about sustainable goods that you might purchase as a consumer, often those ethical, sustainable, good governance products may have a higher price tag or be perceived that they do,” Baker said.
“We think perhaps a lot of consumers carry that sentiment into the insurance and financial services space. There’s a misconception that [companies] need additional internal resources dedicated to creating these sustainable products, like maybe more research, staff, fund managers, and portfolio managers, which would drive up the internal expenses.
“But we’d want to educate consumers that it does not need to cost you more as a consumer to invest your money sustainably.”
Baker underscored the importance of addressing sustainability and ESG to attract the “customers of tomorrow.”
Gen Z Canadians, or those adults aged between 18 and 24, are more inclined towards sustainability and more vulnerable to economic uncertainties, showing a “double impact” of misconceptions about price.
“In the insurance and financial services space, we often think of our older clients because they are the group that have assets that need to be protected from indemnity, whereas younger Canadians are just starting their journey,” said Baker.
“I think traditional insurance and financial services corporations may not focus on their needs, but it is clear from the survey that Canadians aged 18 to 24 care very much about sustainability, and that aligns not only with their values and beliefs as a generation but also their sense of needing longevity and security in a more uncertain economic future.”
Recognizing the younger generation’s concerns, Baker urged the industry to guide them on planning for a sustainable future while navigating economic uncertainties.
By educating clients, demonstrating commitment to sustainability, and dispelling myths about costs, the financial services industry can bridge the gap between their business goals and customer expectations, she said.
What are your thoughts on Canadians’ perceptions of sustainability and ESG in the financial services industry? Please comment below.
