ESG and growing green exposure for directors

Social value and the green agenda have taken on ever-increasing significance in the building sector as we develop greater awareness of the environmental impact and opportunities for positive change.

Adopting ESG strategies can help construction companies manage risk and advance social value. Companies can avoid expensive environmental lawsuits and bad PR by reducing their environmental impact whilst enhancing their reputations and ties with local communities. 

Despite the well-meaning nature of these developments, they do come with increased risk exposures for management teams. Directors, officers and other senior leaders who fail to analyse and disclose climate risks are subject to increased exposures both personally and as a business given the increased public attention, regulatory scrutiny, compliance obligations, and investor scrutiny. 

In the medium term, directors will come under increased scrutiny from investors and authorities to disclose the actions they are taking to minimise environmental impact. It is anticipated that there will be legal and/ or regulatory action against directors who fail to make the necessary modifications or who overstate their company’s environmental credentials.

Adequate protection in the form of a combination of risk management and management liability insurance should be a top priority. Regardless of a claim’s underlying cause, we advise our clients to purchase the widest available coverage, which is intended to safeguard both the company and the director against personal liability. 

To discuss the growing exposures facing directors and how to protect against them connect with one of our advisers today.