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Kazakhstani life insurers are implementing ESG principles

Kazakhstani life insurance companies have begun their journey in the field of ESG transformation. All insurers are showing interest in environmental, social and governance (ESG) aspects. It is important to note that the vast majority of them have already begun the practical implementation of ESG approaches in their activities. Here we will tell you what ESG principles are and how they are implemented by life insurance companies in our country.
Kazakhstani life insurers are implementing ESG principles

ESG is an abbreviation that stands for environmental, social and corporate governance. In a broad sense, ESG is a sustainable business development based on three principles as follows:

E (environment) – a responsible attitude towards the environment;

S (social) – a high social responsibility;

G (governance) – a high quality of corporate governance.

The practice of disclosing information in the field of environmental, social and corporate governance will be introduced into the insurance market next year.

ESG transformation

Kazakhstani life insurers have been consistently and widely implementing various ESG practices and projects for several years now. However, the regulatory framework in the financial sector in the field of sustainable development has only recently begun to take shape. Therefore, the practices of insurers are not fully disclosed and often originate from the people themselves. For example, according to the results of the IV National competition “Green Office 2022”, which was held with the support of the programs of the OSCE and the Ministry of Ecology, Geology and Natural Resources of the Republic of Kazakhstan, Nomad Life became the winner in the category among financial organizations last year. This victory is the merit of all employees who have personally put a lot of effort into improving the company’s business processes and voluntarily adhered to the principles of sustainable development.

“I can state with confidence that Kazakhstan has everything, including the minimum infrastructure, for these principles to work. In general, it is important to note that business in Kazakhstan has been committed to the principles of sustainable development much earlier, even before it has become widespread throughout the world. However, it is important that ESG principles are understood in terms of the specifics of the business. As I have already noted, there are requirements for mining companies, and they cannot be applied to the service sector. It is best not to force it and not to put all of them under the same roof. One can notice that from year to year, people in our country are becoming more and more responsible about environmental pollution and becoming much more socially responsible. But now business is faced with a problem, the solution of which requires the participation of the government, at least, this is the lack of necessary infrastructure for collecting and processing recyclable materials,” says Yelena Taitugoleva, Deputy Chairman of the Board of LIC Nomad Life.

Halyk Life implements projects aimed at environmental protection and site landscaping. Additionally, the company has partially switched to using eco-friendly office paper in its work, which is a product of recycled waste paper.

“Besides, as part of the social component, the company pays great attention to internal labor communications, and incentive, training and personnel development programs. The Company regularly hosts various corporate events for employees aimed at teambuilding and creating a team spirit. We provide young specialists with the opportunity to undergo practical training and internships. In terms of external impact on the social environment, the company has been implementing initiatives to improve financial literacy through information for several years,” shares Zhanar Zhubaniyazova, Chairman of the Board of Halyk Life.

According to Kommesk-Omir, every step the company takes in the ESG field is based on values and commitment to long-term sustainability. We will continue to actively develop and improve our corporate practices in this area to create meaningful and positive change for our company, our employees and society as a whole. “The company has adopted an electronic document management system allowing us to show an environmental friendliness. The company also pays great attention to ensuring fire safety of buildings and fire prevention and protection measures among employees. We maintain our social responsibility by supporting veteran organizations, taking part in charity marathons through voluntary fundraising among employees, donations, and also taking care of the well-being of our employees,” explains Oleg Khanin, Chairman of the Board of LIC Kommesk-Omir.

LIC Freedom Life also recognizes that the company’s sustainability and the life insurance industry’s development are closely related to environmental, social and corporate aspects. To this end, the company is developing areas such as financial literacy, social responsibility, promotion of arts, culture and sports, environmental responsibility and others. “As financial assistance to Kazakhstanis affected by major tragic events such as the January riots and fire in the Abay region, the company launched a special program of voluntary immediate annuity insurance Freedom Support. We also actively support sports initiatives, such as the international competitions Ironman, Oceanman Kazakhstan and the SuperBol football project, and participate in internal corporate sports projects aimed at developing a healthy lifestyle and promoting sports,” says Azamat Yerdessov, Chairman of the Board of LIC Freedom Life.

Regulator’s requirements

Insurers consider it important and necessary to follow ESG principles, and note that they will take steps in this direction based on the requirements of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market. “The topic of ESG should obviously be strategic in modern conditions. It can no longer be simply an additional or optional initiative. Our company has built a corporate governance system that regulates the interaction of internal control bodies, shareholders and other stakeholders and is aimed at ensuring a balance of their interests. The Corporate Governance Code contains additional obligations of the company in terms of openness, social responsibility, and ethical principles of doing business. (…) Working in the general insurance industry, our company has previously published reports on corporate governance, social responsibility and sustainable development in the company’s annual reports posting them on KASE,” explains Oleg Khanin.

The implementation of ESG principles in its activities for Halyk-Life became one of the strategic directions for the coming years. “We included the ESG agenda as one of the main guidelines in the strategy for the coming years, developed several key corporate documents and prepared a sustainability report for all stakeholders. The idea of ESG is, first and foremost, the idea of carу and protection of future generations. Therefore, the topic of sustainable development must necessarily be reflected in the strategic plans of companies of any type of activity. But, I believe that for all of us the most important task now is not formal compliance with ESG principles through the formalization of policies, documents, implementation in strategies but the real development of environmental, social components and improvement of corporate governance practices,” says Zhanar Zhubaniyazova.

Nomad Life, like many large companies in Kazakhstan today, does not stand aside from the general agenda, but smearing and excessive diversity of interpretations make it difficult to advance the ESG agenda. “If industrial or manufacturing companies have certain environmental standards regarding the preservation of the maintenance of environment, then financial companies (such as ours) have a rather indirect impact on environment through their core activities,” clarifies Yelena Taitugoleva.

What do insurers gain?

Some of the principles have unnoticeably become etiquette rules in our country. It becomes increasingly difficult to attract new clients and build the company's image without them. Financial officers say that the new agenda will allow businesses (regardless of their size) to develop the most relevant goals for themselves and ways to achieve them, taking into account the scale of activity and impact on the economy, society and the environment, drawing on the experience of other companies. “We can confidently say that in the near future, neglecting the ESG principles even to a small extent, threatens the existence of the business itself, since it will cause gradual rejection from customers, suppliers, partners, employees and the public, and as a result, provoke decrease in competitiveness. You must admit that “Generation Z” is growing up with more western values, and when this generation becomes the main economic force, we will come to a common perception of the importance of the ESG agenda for business development,” says the Deputy Chairman of the Board of LIC Nomad Life.

According to financial experts, disclosing information about activities in the context of ESG allows LICs to support the principles of open business. “Disclosure of non-financial information related to sustainable development plays an important role in establishing, maintaining and improving engagement with stakeholders, including investors. It is also a means of raising awareness about the opportunities and challenges that the organization faces in the economic, environmental and social fields,” says Chairman of the Board of LIC Kommesk-Omir.

Information disclosure in sustainable development is an important tool used by investors to understand the impact of sustainability issues on business performance, risks and long-term growth prospects. According to EY, in 2022, 99% of surveyed investors take into account the disclosure of ESG information by companies in the process of making investment decisions. “We realize that sustainability management in our sector is still at an early stage. Therefore, we are independently preparing to implement these requirements. Our staff studies both local and international experience in disclosing sustainability reporting,” emphasizes the head of Halyk Life.

In addition to following ESG principles, loyalty on the part of clients and society is influenced by transparency of reporting; it should not raise questions. Companies with a transparent management system also easily receive support from people. “This shows customers transparency across all business processes and enables them to make conscious decisions when choosing insurance products and services. Public information contributes to the development of more sustainable and responsible activities, and creation of long-term value for the company’s employees, clients and partners,” believes the Chairman of the Board of LIC Freedom Life.

ESG regulatory reporting will eliminate or minimize violations of regulatory requirements that will impact the performance of life insurers. And technological advances and other innovations introduced by LICs will stimulate the development of the economy and increase its efficiency.

Photos are from open sources.


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