Mitigating the long-term risks caused by climate change is the main factor driving insurance industry adoption of environmental, social and governance (ESG) practices, a survey by GlobalData has found.

GlobalData says rather than being forced to through regulation or legislation, knowledge among insurers that the impact of climate change is particularly damaging to them is the driver to adopt ESG practices and mitigate some of the risks involved.

Just 7.5% of those polled believe government legislation is driving the adoption of ESG in insurance.

GlobalData analyst Beatriz Benito says the findings reflect that the insurance industry faces a future of “escalating costs and the consequence of ever-increasing severe weather events and natural disasters which will only worsen with climate change”.

“An increasing volume of claims – more often than not associated with big payouts – will eventually make some areas of land uninsurable,” she said.

By withdrawing from insuring carbon-intensive industries, Ms Benito says insurers can facilitate the shift towards a low-carbon economy by adapting underwriting and investment policies.

The challenging outlook will continue to encourage those insurers who have not yet embraced ESG into their corporate values and operations to adopt better ESG practices in the future, GlobalData says, noting ESG practices can help to differentiate from the competition and build a positive reputation with the public.