23 November 2015 1 Comment
A new resource, launched at the Global Compact LEAD Symposium in Madrid on November 19th, provides an overview of mutually beneficial partnerships between businesses and business schools with the aim to further sustainability strategies. To support this, a number of posts focused on these types of partnerships will be featured in more depth on Primetime over the upcoming months.
One partnership example comes to us from the University of Technology Sydney Business School in Australia. A group of Executive MBA students are engaged in a global project bringing together the UN and business partners to explore specific business practices related to sustainability in the insurance industry. I spoke with James Hutchin, Associate Dean Business Practice, and the project leader about this innovative initiative and its potential global benefits.
Provide a brief overview of the project
Executive MBA candidates at University of Technology Sydney Business School in Australia have been undertaking a study which aims to ensure that ESG (Environmental, Social and Governance) risks such as climate change, human rights abuses and corruption are considered in the placement of surety bonds (credit guarantees) for big infrastructure projects. The team is working in collaboration with several of the world’s leading insurers, and the International Finance Corporation, an arm of The World Bank.
How did the project come about?
Carefully led MBA project teams have been a big part of The United Nations Environment Programme Finance Initiative insurance industry work since 2008, when the foundational research for the Principles for Sustainable Insurance was first conducted. Since that time, several further projects have been undertaken, many of them with the involvement of joint MBA teams working from the University Technology Sydney and The Fox School of Business, Temple University (Philadelphia).
The actual incorporation of environmental, social and governance risks in the underwriting of surety bonds for infrastructure projects is at present highly variable from insurance company to company, and varies by region of the world. Our study will hopefully do much to establish a good picture of the current “state of play”, as well as identify what might be some useful guidelines that could be more universally adopted.
What is the Insurers Role in Sustainable Growth? Why is this an important project?
Simply put, no other industry has more alignment of interest with good sustainable outcomes than the insurance industry. When sustainability outcomes go badly, for example hurricane frequency and severity increases because of climate change, then more losses occur which in turn the industry pays. This project is critically important in that it takes the guiding principles of the Principles for Sustainable Insurance (PSI), and then seeks to apply them to a specific line of business (“product”) in a way that is useful and quite pragmatically driven.
How has the project been received by the students? What have been some of the successes?
The project is not yet fully completed and a working group of PSI executives and participating professors is continuing to progress the research. The student work to date has been outstanding, and the learning accomplished really quite remarkable. Many business schools on graduation say to students, “… go forth and change the world…” The project demonstrates our ability to deliver a project, guidance, and process that enables them to do that right now.
What have been some of the results so far?
Preliminary research by the team suggests big differences in how ESG factors are considered in types of projects in different countries. The results will feed into a project involving the United Nations, the World Bank and the world’s largest reinsurer, Munich Re looking at how the insurance industry can strengthen its contribution to sustainable development. They will also inform the development of ESG guiding principles for surety bond underwriting as surety providers are in a position to influence how ESG risks are addressed in big projects.
What advice do you have for others thinking of doing a similar project (perhaps in a different industry?)
- You need deep and specific industry expertise embedded in your project leader.
- There needs to be a practical focus on actual outcomes – this is applied research, not a search for a new theory of business.
- You need a time-tested and solid process. Getting to “professional grade” consulting output is difficult in the best of circumstances; in a university setting, working with student teams, it requires great attention to detail, timelines, and quality management.
- Great students are a must, they will never work harder!
- The “client” must have an executive sponsor deeply committed to the project and in a position to drive outcomes.
We have been so privileged to work with United Nations Environment Programme Finance Initative (UNEP FI), Munich Re, The IFC and others on this project, and have learned much about how to make the generic goals of the PSI actionable at the line of business level. What we most hope for as next is the opportunity to engage more MBA teams in the process, and complete similar projects in other lines of business, working with multiple universities around the world.