ESG performance and US workers’ compensation liability correlations

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Marsh has begun to investigate possible correlations between environmental, social, and governance (ESG) performance and risk performance using the granular data captured through our ESG Risk Rating tool.

Our research of US companies demonstrates the importance of the social factor of ESG being central to ESG strategy, and although the findings relate to the US, we expect the correlation to be similar globally. Uncovering these relationships is expected to grow our understanding of some of the additional levers that influence loss outcomes.

An early area of research has been analysing the relationship between our US clients’ ESG performance and their workers’ compensation losses. To achieve this, we have been comparing their ESG Risk Rating scores to their workers’ compensation experience modification factors (ex mods), which provide an industry-adjusted proxy for claims data.

Our analysis shows an inverse relationship between ex mods and social scores. Organisations with higher social scores tend to have lower ex mods (that is, actual workers’ compensation claims performance is better than expected based on state/exposure mix), and companies with lower social scores tend to have higher ex mods.

We reveal where the strongest correlations were found and how Marsh can help your organisation improve ESG outcomes.

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ESG a key to workforce engagement