The Sustainability Framework consists of the following elements:
Mission: Argo’s core mission is focused on Sustainability and Resilience by ‘Helping businesses stay in business’.
Board sponsor: Kate Nealon
Executive sponsor: Jay Bullock, EVP & Group Chief Financial Officer
Sustainability Leader: Alex Hindson, Group Chief Risk Officer
Committees: Argo Group established a Sustainability Working Group (SWG) in 2016 and is dedicated to the oversight of Sustainability and ESG policies, processes and issues facing the organization. The SWG, which is chaired by the Chief Risk Officer, meets on a quarterly basis and reports each quarter to the Enterprise Risk Management (ERM) steering committee.
The role of the SWG is formalized in its charter (view document) and it reports to the ERM steering committee which also has oversight of Sustainability in its charter (view document)
The SWG met on a quarterly basis through 2019 and was well attended, with an average attendance at each meeting of 10 members. The frequency of meeting has been increased to 8 per annum at members’ request for 2020.
The CRO reports material Sustainability-related issues directly to the Board Risk & Capital Committee on a quarterly basis as required.
Objectives and Plans: Argo Group has established short and long-term objectives with respect to its Sustainability program and these are reviewed and re-approved on an annual basis. The SWG tracks progress against these objectives and related action plans.
Risk Assessment: The SWG receives a detailed threat and opportunity analysis of the major Sustainability risks facing the organization every 6 months and escalates key issues to the ERM steering committee. The risk assessment considers both upside (opportunity) and downside (threats) risks that could impact Argo Group and measures the exposure in terms of the reputational impact to seven key stakeholder groups. Controls and action plans are documented and the outcome is a Sustainability risk heat map. Material threats and opportunities identified include Diversity & Inclusion, Climate Risk, dependency on third-party partners and the increasing use of ESG indices by shareholders to evaluate investments.
As such, Climate Change has been classified by Argo Group as one of its material emerging risks, and as such it is regularly monitored by the risk management function for the primary purpose of assessing the potential impact of climate change on Argo Group’s business operations, insurance products and clients. The Argo Group emerging risk monitoring process includes scanning available resources for information regarding climate change related current events, litigation, regulation, legislation, the political environment and industry groups’ actions that may have an impact on the Argo Group Climate Change Policy and/or strategy. ‘Stranded assets’ have been specifically identified as a potential material risk factor. Utilizing the Lloyd’s of London report entitled “Stranded Assets: the transition to a low carbon economy – Overview for the insurance industry”, Argo Group has maintained stress test scenarios that consider the potential impact of high-carbon assets within its portfolio, on its capital adequacy. The results of this study were integrated with other scenarios within the wider Stress & Scenario Testing Framework (SSTF).
Conversely, because Argo Group is a financial services company operating in an office-based environment and in a business-to-business context it considers itself to have very little direct exposure to commodity and resource usage risks such as water, energy and primary raw materials or the production of hazardous waste. Similarly, its supply chain exposures to third parties associated with human rights and labour standards are not considered material.