20 March 2024ArticleRe/insurance

Tackling ESG—as a company and as a regulator

The BMA is putting ESG issues at the heart of its approach. Some of its key initiatives are detailed here by chief executive Craig Swan—as well as the reason he believes embracing ESG will make the BMA a better regulator and a better place to work.

The Bermuda Monetary Authority (Authority or BMA), along with every other regulator around the world, has faced a very specific challenge in recent years. Environmental, social and corporate governance (ESG) issues have come to the forefront with growing importance in almost every segment of Bermuda’s economy. 

This means ESG values and standards are becoming increasingly important for the many companies the BMA regulates, as they look to the BMA for regulatory guidance—to gain a better sense of what they should be doing, when, and the consequences if they do not do certain things.

At the same time, the Authority must also look inward and reflect on the BMA as an organisation and any standards it requires of others. In its own right, the BMA is a key employer and an important part of the community in Bermuda. It needs to “practise what it preaches” and embrace ESG values for all the same valid reasons that it asks the companies it regulates to consider. For any company, this can be a big challenge—but it is one that Craig Swan, BMA chief executive officer, has been keen to rise to. 

“It is a priority for us to develop and formalise an ESG model for the organisation and we have launched a range of initiatives with this in mind,” Swan says.

The Authority has initiated several processes to define what ESG truly means for the BMA—as an organisation, company and employer in its own right with buildings, staff and accountabilities, and as a regulator with responsibilities to the wider markets and the people of Bermuda.

Such an approach must be comprehensive and multifaceted, Swan says, while recognising the importance of the dual lens. 

The BMA’s approach is divided into a number of pillars, but it has two main ones: ESG as it applies to the BMA as a company—as an employer and part of the community in Bermuda—and ESG as it applies these values to the companies it regulates. Perhaps the most important aspect of ESG across both pillars can be summed up in one word: people. 

“We are looking closely at how a data-led approach can be harnessed to support the integration of ESG considerations into the BMA’s regulatory framework.” Craig Swan, BMA.

 BMA—the business: people first

The highest priority in Swan’s approach revolves around attracting and keeping the best people. To do this, one of the key focuses is on Bermudian graduates—ensuring they are exposed to career opportunities at the regulator and view the BMA as an attractive place to work.

This approach starts with attracting talent. The BMA’s Graduate Training Programme (GTP) allows the Authority to engage with the local community by providing opportunities for university graduates to gain relevant regulatory and industry experience. The GTP provides Bermudians with the opportunity to get practical experience as well as to obtain qualifications/designations. 

Trainees acquire valuable work experience as the Authority guides them through the various tasks and responsibilities in different departments. Detailed information about the GTP can be found here. 

The BMA’s focus on talent is reinforced by and inextricably entwined with its approach to ongoing diversity, equity and inclusion (DEI) initiatives. The BMA is already a diverse company, representing more than 30 different nationalities. But Swan is clear that the Authority is not resting on its laurels—DEI must become central to the organisation’s ethos. “DEI initiatives are now playing a very key role in our corporate strategy and the annual strategic planning process,” Swan says. 

To ensure the BMA delivers on DEI, the BMA has rolled out many projects designed to ensure this remains the case. For example, the BMA conducts an annual strategic planning process involving an all-staff call to action. Department heads are encouraged to conduct discussions with staff at every level to listen to a range of perspectives and insights on where the BMA should focus. This feedback is used to refine and improve its future approach.

The BMA also has what it calls a Culture Influencer Team (CIT), which takes the form of a voluntary, cross-functional, diverse working group. Its purpose is to provide feedback and suggestions and support management in rolling out other programmes designed to adopt and embrace the BMA’s aspirational corporate culture. 

The success of such initiatives is helped by the fact that the BMA is already a diverse organisation. In the case of gender diversity, for example, women play a prominent role in the BMA’s operations, and many serve in senior executive leadership positions, including on the board of directors. Although the BMA has had a bit of a head-start in this sphere, it is careful not to ever take diversity for granted. 

A wider footprint

The BMA’s commitment to people goes well beyond its employees—the Authority understands that its footprint is much wider than its workforce and its stakeholders are multifaceted. In response, the company is keenly aware of the importance of its role in the wider community and it has been active in continuously evolving its approach to community engagement. 

At the heart of this approach, the BMA launched a public-facing webpage in October 2023, titled “Community and Culture”, which is aimed at improving the BMA’s online presence and broadening the Authority’s engagement with the community. 

This webpage publishes content related to the BMA’s social engagements and corporate initiatives. For example, in September 2023, the BMA played a prominent role in the Island-Wide Community Clean-Up in collaboration with Keep Bermuda Beautiful (KBB). This participation with KBB was the focus of the Authority’s second annual Community Day demonstrating its commitment to protecting the Island’s fragile coastal ecosystem and beautifying Bermuda’s open spaces.

Such initiatives help make the BMA and Bermuda more widely a sustainable, healthy and attractive place to live and work and dovetail with an important part of its ESG strategy as the Authority looks to embrace the ‘E’ in ESG. As part of the strategy, techniques to mitigate the BMA’s carbon footprint, as well as the BMA’s wider environmental impact, are incorporated.

A focus on sustainability

To achieve these goals holistically, the BMA is in the process of developing a Sustainability Strategy that will embed ESG considerations across all its business functions. The plan encompasses environmental stewardship, social responsibility, ethical governance and economic resilience standards, which promotes sustainable business practices. 

“The goal is to make changes that help to lower our carbon footprint, mitigate risks and provide opportunities for innovation and growth in the financial services sector. Additionally, we are looking closely at how a data-led approach can be harnessed to support the integration of ESG considerations into the BMA’s regulatory framework,” Swan says.

The BMA’s Sustainability Strategy is multifaceted and covers wider aims as well as specific goals and targets. At its heart, Swan says, it is committed to integrating sustainability as a fundamental factor in its decision-making process at all levels, including the procurement of services, travel and equipment.

Closely linked to this, the BMA is looking to ensure all operational activities are conducted sustainably, upholding environmental responsibility. It wants to equip employees with increased knowledge of the importance of sustainability and training on the new skills they will need to face future challenges while also prioritising sound governance and leadership and managing resources more sustainably. Finally, the BMA is also monitoring and efficiently utilising all resources at its disposal to minimise waste.

The Authority has made some specific changes to its building design. For example, it has adopted best practices relating to sustainable facilities management, which will enable it to apply for Leadership in Energy and Environmental Design (LEED) certification for its facilities. 

“The BMA is supporting the financial services industry in addressing climate change with greater urgency than ever.”

“LEED-certified buildings save money, improve efficiency, lower carbon emissions and create healthier places for people. The LEED certification signifies the creation of healthy, highly efficient, cost-saving green buildings, improving environmental performance from the BMA’s carbon footprint to its indoor environmental quality,” Swan says.

The BMA is also implementing sustainable projects to conserve water and energy and improve waste management. This includes energy-efficient lighting systems, water-conserving bathroom fixtures and the reduction of single-use plastics by encouraging staff to use water bottles and more environmentally-friendly disposable cups.

Finally, the BMA will introduce environmentally-friendly polymer banknotes, initially for $2 and $5 denominations, targeting an early 2024 rollout. This change will be visible to everyone living in Bermuda, as Bermuda’s national currency switches to using a more waterproof and durable material that can be recycled. 

BMA—the regulator

There is another side of the ESG coin for the BMA. The focus on its own activities is only part of the picture, as it must also set and monitor ESG standards for the many companies it regulates. 

“The BMA adheres to high ethical standards in its operations and expects the same from the financial institutions it regulates, including measures to prevent conflicts of interest, maintain confidentiality and promote professional integrity,” Swan says.

As a regulator, the BMA has kickstarted several initiatives under the ESG umbrella, all aimed at helping the companies it regulates place ESG at the forefront of their activities. These initiatives are nuanced and designed to be applicable to each sector and the nature of the activities of companies within those sectors. 

One example is the BMA’s introduction of an ESG survey for the insurance sector, which was expected to be concluded in late 2023. The findings will be used to help further guide and educate the industry. More details on the survey, in consultation with the industry, will be unveiled in 2024.

To underpin these efforts, the BMA published an updated Insurance Code of Conduct in August 2022, which detailed how ESG should be incorporated into the governance and risk management practices of insurers operating in Bermuda. In effect, it expanded the duties, requirements, standards and principles that are to be observed by all insurers. At the heart of the updates was a requirement for insurers to integrate ESG considerations within their business frameworks. 

Another example can be seen in the BMA’s work regulating and overseeing the Insurance Innovation Hub and new ESG and climate change-related solution providers and products. The BMA is keen to stress that it recognises the growing importance of innovation in the insurance sector and the wider financial services industry, as well as the vital role that innovation plays in promoting efficiency and enhancing competitiveness in the market. 

That is why the BMA has launched two parallel innovation tracks: the insurance regulatory sandbox and an innovation hub, which were both initially targeted at insurtech companies.

“The sandbox and innovation hub is designed to encourage and nurture further innovation in the insurance and wider financial services sectors as we support companies in testing new technology in collaborative spaces,” Swan says. 

The BMA has continued to build out Bermuda’s recovery and resolution framework in the insurance sector, consulting with the public on amendments to the Insurance Act to introduce recovery planning powers. 

Managing climate change

No discussion around ESG is complete without a specific emphasis on climate change—a phenomenon representing both opportunities and challenges for Bermuda. In this regard, the BMA is supporting the financial services industry in addressing climate change with greater urgency than ever. 

A good starting point for understanding the BMA’s approach is the “2021 Climate Exposure Survey”, which was published in May 2022. This landmark report outlines key statistics, findings and challenges based on companies’ physical risk exposures, transition risk exposures and qualitative assessments. 

To further back this up, the BMA issued guidance notes covering the Management of Climate Risk for Commercial Insurers in 2022 for public consultation. This paper details the BMA’s expectations regarding climate risk in the context of ESG risk as well as corporate governance and risk management requirements under the revised Insurance Code. 

Given the central role of the insurance industry in Bermuda’s economy, insurers were required to address their current policies and processes by the end of 2022 and implement an action plan to progress towards a fully established framework by the end of 2025. The BMA expects insurers to reassess their risks regularly and be responsive to evolving developments and changes in the field of climate change.

Swan stresses how important this work is to the BMA, but adds that it is only one piece of the puzzle, which is a developing picture for the regulator as it looks to tackle ESG in its dual role in Bermuda. 

“We have done a lot of good things already—but this is just the start,” he says. “The ethos of ESG will become central to everything we do, but we are only at the start of what will be a very important journey.” 

Customer education and protection

The education and protection of consumers represent a key pillar of the BMA’s ESG approach—and it is arguably one of the most important. 

Since 2020, BMA experts have been involved in teaching components of a course at Bermuda College, titled “Foundations of Bermuda’s International Re/Insurance Sector”, relating to the role of regulation in insurance and the captive insurance industry. 

An annual partnership between Bermuda College, the Association of Bermuda Insurers and Reinsurers and St. John’s University in New York, provides the 14-week course and covers the evolution of Bermuda’s re/insurance industry and its economic significance. 

Closely linked to this, the BMA is committed to educating and supporting the community. In October 2023, the BMA launched a week-long online public education campaign aimed at helping investors protect themselves by making informed choices and will be increasing its focus on financial literacy education in 2024. 

In addition, the charitable activities of BMA staff and the many ways the BMA as an organisation focuses on charitable support of community-serving organisations are highlighted in pages 18 to 20 of the BMA’s 2022 Annual Report. Additional details can be found on the website: 

Further details on the BMA’s approach to corporate governance and sustainability within the financial services sector can be found in the Community and Culture section of the website: 

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