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Airlines
Airlines industry entities provide air transportation globally to passengers for both leisure and business purposes. This includes commercial full-service, low-cost and regional airlines. Full-service carriers typically use a hub-and-spoke model to design their routes within countries and internationally. Low-cost carriers usually offer a smaller number of routes as well as no-frills service to their customers. Regional carriers typically operate under contract to full-service carriers, expanding the network of the larger carriers. Many airline entities also have a cargo segment in their operations to generate additional revenue. Entities in the industry commonly form partnerships or join alliances to increase network size. Operating as an alliance allows airlines to offer customers access to international or otherwise underserved itineraries on more than one airline under one ticket. At the same time, airlines share some overhead costs and increase their competitive position in the global market without having to operate outside their home country.
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Insurance
The Insurance industry provides both traditional and non-traditional insurance-related products. Traditional policy lines include property, life, casualty and reinsurance. Non-traditional products include annuities, alternative risk transfers and financial guarantees. Entities in the insurance industry also engage in proprietary investments. Insurance entities generally operate within a single segment in the industry, for example, property and casualty, although some large insurance entities have diversified operations. Similarly, entities may vary based on the level of their geographical segmentation. Whereas large entities may underwrite insurance premiums in many countries, smaller entities generally operate in a single country or jurisdiction. Insurance premiums, underwriting revenue and investment income drive industry growth, while insurance claim payments present the most significant cost and source of uncertainty for profits. Insurance entities provide products and services that enable the transfer, pooling and sharing of risk necessary for a well-functioning economy. Insurance entities, through their products, can also create a form of moral hazard, reducing incentives to improve underlying behaviour and performance, and thus contributing to sustainability-related impacts. Like other financial institutions, insurance entities face risks associated with credit and financial markets. Within the industry, regulators have identified entities that engage in non-traditional or non-insurance activities, including credit default swaps (CDS) protection and debt securities insurance, as being more vulnerable to financial market developments, and therefore more likely to amplify or contribute to systemic risk. As a result, some insurance entities may be designated as Systemically Important Financial Institutions, thus exposing them to increased regulation and oversight.
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Relevant Issues for both Industries (8 of 26)

Why are some issues greyed out?

The SASB Standards vary by industry based on the different sustainability-related risks and opportunities within an industry. The issues in grey were not identified during the standard-setting process as the most likely to be useful to investors, so they are not included in the Standard. Over time, as the ISSB continues to receive market feedback, some issues may be added or removed from the Standard. Each company determines which sustainability-related risks and opportunities are relevant to its business. The Standard is designed for the typical company in an industry, but individual companies may choose to report on different sustainability-related risks and opportunities based on their unique business model.

Environment
- GHG Emissions
  The category addresses direct (Scope 1) greenhouse gas (GHG) emissions that a company generates through its operations. This includes GHG emissions from stationary (e.g., factories, power plants) and mobile sources (e.g., trucks, delivery vehicles, planes), whether a result of combustion of fuel or non-combusted direct releases during activities such as natural resource extraction, power generation, land use, or biogenic processes. The category further includes management of regulatory risks, environmental compliance, and reputational risks and opportunities, as they related to direct GHG emissions. The seven GHGs covered under the Kyoto Protocol are included within the category—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).
- Air Quality
- Energy Management
- Water & Wastewater Management
- Waste & Hazardous Materials Management
- Ecological Impacts
Social Capital
- Human Rights & Community Relations
- Customer Privacy
- Data Security
- Access & Affordability
- Product Quality & Safety
- Customer Welfare
- Selling Practices & Product Labeling
  The category addresses social issues that may arise from a failure to manage the transparency, accuracy, and comprehensibility of marketing statements, advertising, and labeling of products and services. It includes, but is not limited to, advertising standards and regulations, ethical and responsible marketing practices, misleading or deceptive labeling, as well as discriminatory or predatory selling and lending practices. This may include deceptive or aggressive selling practices in which incentive structures for employees could encourage the sale of products or services that are not in the best interest of customers or clients.
Human Capital
- Labour Practices
  The category addresses the company’s ability to uphold commonly accepted labour standards in the workplace, including compliance with labour laws and internationally accepted norms and standards. This includes, but is not limited to, ensuring basic human rights related to child labour, forced or bonded labour, exploitative labour, fair wages and overtime pay, and other basic workers’ rights. It also includes minimum wage policies and provision of benefits, which may influence how a workforce is attracted, retained, and motivated. The category further addresses a company’s relationship with organized labour and freedom of association.
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion
Business Model and Innovation
- Product Design & Lifecycle Management
  The category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
- Business Model Resilience
- Supply Chain Management
- Materials Sourcing & Efficiency
- Physical Impacts of Climate Change
  The category addresses the company’s ability to manage risks and opportunities associated with direct exposure of its owned or controlled assets and operations to actual or potential physical impacts of climate change. It captures environmental and social issues that may arise from operational disruptions due to physical impacts of climate change. It further captures socio-economic issues resulting from companies failing to incorporate climate change consideration in products and services sold, such as insurance policies and mortgages. The category relates to the company’s ability to adapt to increased frequency and severity of extreme weather, shifting climate, sea level risk, and other expected physical impacts of climate change. Management may involve enhancing resiliency of physical assets and/or surrounding infrastructure as well as incorporation of climate change-related considerations into key business activities (e.g., mortgage and insurance underwriting, planning and development of real estate projects).
Leadership and Governance
- Business Ethics
- Competitive Behaviour
  The category covers social issues associated with existence of monopolies, which may include, but are not limited to, excessive prices, poor quality of service, and inefficiencies. It addresses a company’s management of legal and social expectation around monopolistic and anti-competitive practices, including issues related to bargaining power, collusion, price fixing or manipulation, and protection of patents and intellectual property (IP).
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
  The category addresses the company’s use of management systems and scenario planning to identify, understand, and prevent or minimize the occurrence of low-probability, high-impact accidents and emergencies with significant potential environmental and social externalities. It relates to the culture of safety at a company, its relevant safety management systems and technological controls, the potential human, environmental, and social implications of such events occurring, and the long-term effects to an organization, its workers, and society should these events occur.
- Systemic Risk Management
  The category addresses the company’s contributions to or management of systemic risks resulting from large-scale weakening or collapse of systems upon which the economy and society depend. This includes financial systems, natural resource systems, and technological systems. It addresses the mechanisms a company has in place to reduce its contributions to systemic risks and to improve safeguards that may mitigate the impacts of systemic failure. For financial institutions, the category also captures the company’s ability to absorb shocks arising from financial and economic stress and meet stricter regulatory requirements related to the complexity and interconnectedness of companies in the industry.

Disclosure Topics

What is the relationship between General Issue Category and Disclosure Topics?

The General Issue Category is an industry-agnostic version of the Disclosure Topics that appear in each SASB Standard. Disclosure topics represent the industry-specific impacts of General Issue Categories. The industry-specific Disclosure Topics ensure each SASB Standard is tailored to the industry, while the General Issue Categories enable comparability across industries. For example, Health & Nutrition is a disclosure topic in the Non-Alcoholic Beverages industry, representing an industry-specific measure of the general issue of Customer Welfare. The issue of Customer Welfare, however, manifests as the Counterfeit Drugs disclosure topic in the Biotechnology & Pharmaceuticals industry.

Airlines Remove
Access Standard
- GHG Emissions
  The category addresses direct (Scope 1) greenhouse gas (GHG) emissions that a company generates through its operations. This includes GHG emissions from stationary (e.g., factories, power plants) and mobile sources (e.g., trucks, delivery vehicles, planes), whether a result of combustion of fuel or non-combusted direct releases during activities such as natural resource extraction, power generation, land use, or biogenic processes. The category further includes management of regulatory risks, environmental compliance, and reputational risks and opportunities, as they related to direct GHG emissions. The seven GHGs covered under the Kyoto Protocol are included within the category—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).
  - Greenhouse Gas Emissions
    As a result of a heavy reliance on hydrocarbon fuels, the Airlines industry generates significant emissions, more than 99% of which are in the form of carbon dioxide (CO2). Therefore, the industry is subject to compliance costs and risks associated with climate change mitigation policies. The main sources of greenhouse gas (GHG) emissions for airlines entities are aircraft fuel use and emissions, ground equipment and facility electricity. Aircraft fuel consumption is the largest contributor to total emissions from the industry, and fuel management is a critical part of reducing emissions. Management of fuel-related environmental impacts includes increasing fuel efficiency through fleet upgrades, retrofits, and flight speed and route design optimisation, as well as using alternative and sustainable fuels. These initiatives require capital expenditures, but in the long term, they may reduce fuel costs and decrease exposure to GHG emissions programmes and regulatory risk.
- Selling Practices & Product Labeling
  The category addresses social issues that may arise from a failure to manage the transparency, accuracy, and comprehensibility of marketing statements, advertising, and labeling of products and services. It includes, but is not limited to, advertising standards and regulations, ethical and responsible marketing practices, misleading or deceptive labeling, as well as discriminatory or predatory selling and lending practices. This may include deceptive or aggressive selling practices in which incentive structures for employees could encourage the sale of products or services that are not in the best interest of customers or clients.
  
  None
- Labour Practices
  The category addresses the company’s ability to uphold commonly accepted labour standards in the workplace, including compliance with labour laws and internationally accepted norms and standards. This includes, but is not limited to, ensuring basic human rights related to child labour, forced or bonded labour, exploitative labour, fair wages and overtime pay, and other basic workers’ rights. It also includes minimum wage policies and provision of benefits, which may influence how a workforce is attracted, retained, and motivated. The category further addresses a company’s relationship with organized labour and freedom of association.
  - Labour Practices
    Collective agreements cover many workers in the Airlines industry and guide fair wage discussions, safe working conditions and freedom of association, which are among basic worker rights. The organising of essential personnel and increased wages or benefits may result in higher labour costs. At the same time, labour practices may affect long-term business profitability. Effective management of, and communication associated with, issues such as worker pay and working conditions may prevent conflicts with workers that could result in extended periods of strikes, which may slow or suspend operations and damage an entity’s reputation, potentially reducing revenue and market share.
- Product Design & Lifecycle Management
  The category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
  
  None
- Physical Impacts of Climate Change
  The category addresses the company’s ability to manage risks and opportunities associated with direct exposure of its owned or controlled assets and operations to actual or potential physical impacts of climate change. It captures environmental and social issues that may arise from operational disruptions due to physical impacts of climate change. It further captures socio-economic issues resulting from companies failing to incorporate climate change consideration in products and services sold, such as insurance policies and mortgages. The category relates to the company’s ability to adapt to increased frequency and severity of extreme weather, shifting climate, sea level risk, and other expected physical impacts of climate change. Management may involve enhancing resiliency of physical assets and/or surrounding infrastructure as well as incorporation of climate change-related considerations into key business activities (e.g., mortgage and insurance underwriting, planning and development of real estate projects).
  
  None
- Competitive Behaviour
  The category covers social issues associated with existence of monopolies, which may include, but are not limited to, excessive prices, poor quality of service, and inefficiencies. It addresses a company’s management of legal and social expectation around monopolistic and anti-competitive practices, including issues related to bargaining power, collusion, price fixing or manipulation, and protection of patents and intellectual property (IP).
  - Competitive Behaviour
    The Airlines industry is characterised by competitive margins because of high fixed capital and labour costs and competition with government-subsidised carriers in some markets. Airlines often seek cost savings using economies of scale with alliances or consolidation, which may result in market concentration. The industry also has high barriers to entry because of limited landing rights and increasing airport congestion. Together, these characteristics may encourage entities to engage in anti-competitive practices that increase consumer prices. As a result, antitrust authorities have scrutinised some airline industry practices such as airport slot management, predatory pricing, and alliances and mergers. Legal fees, reputational risk, delayed merger or acquisition transaction costs, and limits to growth through acquisition or merger may create material risks for investors.
- Critical Incident Risk Management
  The category addresses the company’s use of management systems and scenario planning to identify, understand, and prevent or minimize the occurrence of low-probability, high-impact accidents and emergencies with significant potential environmental and social externalities. It relates to the culture of safety at a company, its relevant safety management systems and technological controls, the potential human, environmental, and social implications of such events occurring, and the long-term effects to an organization, its workers, and society should these events occur.
  - Accident & Safety Management
    Air travel accidents may result in significant consequences. Passenger safety is paramount in the Airlines industry. Although air travel is one of the safest transport modes, airlines are held to very high safety standards, and consumers expect accident-free operations. Furthermore, since products transported by air tend to be high-value or perishable goods, delivering them safely and in a timely manner is a priority for any carrier. Airline accidents may result in significant environmental and social externalities and require entities to pay for remediation and victim compensation. Safety incidents or violations of safety regulations may affect an entity’s reputation, increasing its risk and cost of capital, resulting in reduced consumer demand and revenues. Even if they occur rarely, larger accidents may result in significant, long-term effects on brand value and revenue growth. Providing adequate employee safety training and ensuring the health and well-being of crew members is critical to ensuring safety. Timely and competent aircraft maintenance may minimise the chances of technical failure and regulatory penalties for non-compliance.
- Systemic Risk Management
  The category addresses the company’s contributions to or management of systemic risks resulting from large-scale weakening or collapse of systems upon which the economy and society depend. This includes financial systems, natural resource systems, and technological systems. It addresses the mechanisms a company has in place to reduce its contributions to systemic risks and to improve safeguards that may mitigate the impacts of systemic failure. For financial institutions, the category also captures the company’s ability to absorb shocks arising from financial and economic stress and meet stricter regulatory requirements related to the complexity and interconnectedness of companies in the industry.
  
  None
Insurance Remove
Access Standard
- GHG Emissions
  The category addresses direct (Scope 1) greenhouse gas (GHG) emissions that a company generates through its operations. This includes GHG emissions from stationary (e.g., factories, power plants) and mobile sources (e.g., trucks, delivery vehicles, planes), whether a result of combustion of fuel or non-combusted direct releases during activities such as natural resource extraction, power generation, land use, or biogenic processes. The category further includes management of regulatory risks, environmental compliance, and reputational risks and opportunities, as they related to direct GHG emissions. The seven GHGs covered under the Kyoto Protocol are included within the category—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).
  
  None
- Selling Practices & Product Labeling
  The category addresses social issues that may arise from a failure to manage the transparency, accuracy, and comprehensibility of marketing statements, advertising, and labeling of products and services. It includes, but is not limited to, advertising standards and regulations, ethical and responsible marketing practices, misleading or deceptive labeling, as well as discriminatory or predatory selling and lending practices. This may include deceptive or aggressive selling practices in which incentive structures for employees could encourage the sale of products or services that are not in the best interest of customers or clients.
  - Transparent Information & Fair Advice for Customers
    Insurance products play an important societal role in alleviating unexpected economic shocks, allowing individual policyholders to reduce the financial consequences of events such as illnesses, accidents and deaths. However, unclear insurance policies, ambiguous product terms and potentially misleading sales tactics may erode brand reputation, spur legal disputes, and reduce the number of services and products an entity can offer. Regulators may deem some policies overly complex and unsuitable for customers. Moreover, entities compete based on financial strength, price, brand reputation, services offered and customer relationships. Dissatisfied customers may reduce or avoid insurance coverage, potentially leading to negative financial outcomes such as personal bankruptcies. While financial regulators continue to emphasise consumer protection and accountability, entities that maintain transparent policy terms and sell products to customers best suited to them may better maintain their brand reputation, avoid regulatory scrutiny and protect shareholder value. Failure to inform customers about products in a clear and transparent manner may result in increased consumer complaints, customer churn, or regulatory fines and settlements.
- Labour Practices
  The category addresses the company’s ability to uphold commonly accepted labour standards in the workplace, including compliance with labour laws and internationally accepted norms and standards. This includes, but is not limited to, ensuring basic human rights related to child labour, forced or bonded labour, exploitative labour, fair wages and overtime pay, and other basic workers’ rights. It also includes minimum wage policies and provision of benefits, which may influence how a workforce is attracted, retained, and motivated. The category further addresses a company’s relationship with organized labour and freedom of association.
  
  None
- Product Design & Lifecycle Management
  The category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
  - Incorporation of Environmental, Social and Governance Factors in Investment Management
    Insurance entities must invest capital to preserve accumulated premium revenues equivalent to expected policy claim pay-outs and maintain long-term asset-liability parity. Because environmental, social and governance (ESG) factors increasingly have a material impact on the performance of corporations and other assets, insurance entities increasingly must incorporate these factors into their investment management. Failure to address these issues may diminish risk-adjusted portfolio returns and limit an entity’s ability to issue claim payments. Entities, therefore, should enhance disclosure on how they incorporate ESG factors, including climate change and natural resource constraints, into the investment of policy premiums and how they affect the portfolio risk.
  - Policies Designed to Incentivise Responsible Behaviour
    Advances in technology and the development of new policy products have allowed insurance entities to limit claim payments while encouraging responsible behaviour. The industry is subsequently in a unique position to generate positive social and environmental externalities. Insurance entities can incentivise healthy lifestyles and safe behaviour as well as develop sustainability-related projects and technologies, such as those focused on renewable energy, energy efficiency and carbon capture. As the renewable energy industry continues to grow, insurance entities may seek related growth opportunities by underwriting insurance in this area. Additionally, policy clauses may encourage customers to incorporate environmental, social and governance (ESG) factors to mitigate overall underwriting portfolio risk, which may reduce insurance pay-outs over the long term. Therefore, disclosure on products related to energy efficiency and low carbon technology, as well as discussion of how entities incentivise health, safety or environmentally responsible actions or behaviours, may assist investors in assessing how insurance entities incentivise responsible behaviour.
  - Financed Emissions
    Entities participating in insurance activities face risks and opportunities related to the greenhouse gas emissions associated with those activities. Counterparties, borrowers or investees with higher emissions might be more susceptible to risks associated with technological changes, shifts in supply and demand and policy change which in turn can impact the prospects of a financial institution that is providing financial services to these entities. These risks and opportunities can arise in the form of credit risk, market risk, reputational risk and other financial and operational risks. For example, credit risk might arise in relation to financing clients affected by increasingly stringent carbon taxes, fuel efficiency regulations or other policies; credit risk might also arise through related technological shifts. Reputational risk might arise from financing fossil-fuel projects. Entities participating in insurance activities are increasingly monitoring and managing such risks by measuring their financed emissions. This measurement serves as an indicator of an entity’s exposure to climate-related risks and opportunities and how it might need to adapt its financial activities over time.
- Physical Impacts of Climate Change
  The category addresses the company’s ability to manage risks and opportunities associated with direct exposure of its owned or controlled assets and operations to actual or potential physical impacts of climate change. It captures environmental and social issues that may arise from operational disruptions due to physical impacts of climate change. It further captures socio-economic issues resulting from companies failing to incorporate climate change consideration in products and services sold, such as insurance policies and mortgages. The category relates to the company’s ability to adapt to increased frequency and severity of extreme weather, shifting climate, sea level risk, and other expected physical impacts of climate change. Management may involve enhancing resiliency of physical assets and/or surrounding infrastructure as well as incorporation of climate change-related considerations into key business activities (e.g., mortgage and insurance underwriting, planning and development of real estate projects).
  - Physical Risk Exposure
    Catastrophic losses associated with extreme weather events will continue to have a material, adverse effect on the Insurance industry. The extent of this effect may evolve as climate change increases the frequency and severity of both modelled and non-modelled natural catastrophes, including hurricanes, floods and droughts. Failure to appropriately understand environmental risks, and price them into the underwritten insurance products, may result in higher-than-expected claims on policies. Therefore, insurance entities that incorporate climate change considerations into their underwriting process for individual contracts, as well as the management of entity-level risks and capital adequacy, may be better positioned to create value over the long-term. Enhanced disclosure of an entity’s approach to incorporating these factors, in addition to quantitative data such as the probable maximum loss and total losses attributable to insurance pay-outs, may provide investors with the information necessary to assess current and future performance on this issue.
- Competitive Behaviour
  The category covers social issues associated with existence of monopolies, which may include, but are not limited to, excessive prices, poor quality of service, and inefficiencies. It addresses a company’s management of legal and social expectation around monopolistic and anti-competitive practices, including issues related to bargaining power, collusion, price fixing or manipulation, and protection of patents and intellectual property (IP).
  
  None
- Critical Incident Risk Management
  The category addresses the company’s use of management systems and scenario planning to identify, understand, and prevent or minimize the occurrence of low-probability, high-impact accidents and emergencies with significant potential environmental and social externalities. It relates to the culture of safety at a company, its relevant safety management systems and technological controls, the potential human, environmental, and social implications of such events occurring, and the long-term effects to an organization, its workers, and society should these events occur.
  
  None
- Systemic Risk Management
  The category addresses the company’s contributions to or management of systemic risks resulting from large-scale weakening or collapse of systems upon which the economy and society depend. This includes financial systems, natural resource systems, and technological systems. It addresses the mechanisms a company has in place to reduce its contributions to systemic risks and to improve safeguards that may mitigate the impacts of systemic failure. For financial institutions, the category also captures the company’s ability to absorb shocks arising from financial and economic stress and meet stricter regulatory requirements related to the complexity and interconnectedness of companies in the industry.
  - Systemic Risk Management
    Entities in the Insurance industry have the potential to pose, amplify or transmit a threat to the financial system. The size, interconnectedness and complexity of entities highlight the industry’s exposure to systemic risk. Regulators have identified entities that engage in non-traditional or non-insurance-related activities as being more vulnerable to financial market developments and subsequently more likely to contribute to systemic risk. As a result, entities may be designated as Systemically Important Financial Institutions. Central banking systems in various jurisdictions may subject such entities to stricter prudential regulatory standards and oversight. Such entities may face stricter limits on their risk-based capital, leverage, liquidity and credit exposure. In addition, regulators may require entities to maintain a plan for rapid and orderly dissolution in the event of financial distress. Regulatory compliance can be costly, and failure to meet qualitative and quantitative regulatory performance thresholds could lead to substantial penalties. To demonstrate how these risks are being managed, entities should disclose important aspects of their systemic risk management and their ability to meet stricter regulatory requirements.

General Issue Category

Remove Airlines Access Standard

Remove Insurance Access Standard

GHG Emissions

Greenhouse Gas Emissions
As a result of a heavy reliance on hydrocarbon fuels, the Airlines industry generates significant emissions, more than 99% of which are in the form of carbon dioxide (CO2). Therefore, the industry is subject to compliance costs and risks associated with climate change mitigation policies. The main sources of greenhouse gas (GHG) emissions for airlines entities are aircraft fuel use and emissions, ground equipment and facility electricity. Aircraft fuel consumption is the largest contributor to total emissions from the industry, and fuel management is a critical part of reducing emissions. Management of fuel-related environmental impacts includes increasing fuel efficiency through fleet upgrades, retrofits, and flight speed and route design optimisation, as well as using alternative and sustainable fuels. These initiatives require capital expenditures, but in the long term, they may reduce fuel costs and decrease exposure to GHG emissions programmes and regulatory risk.

Selling Practices & Product Labeling

Transparent Information & Fair Advice for Customers
Insurance products play an important societal role in alleviating unexpected economic shocks, allowing individual policyholders to reduce the financial consequences of events such as illnesses, accidents and deaths. However, unclear insurance policies, ambiguous product terms and potentially misleading sales tactics may erode brand reputation, spur legal disputes, and reduce the number of services and products an entity can offer. Regulators may deem some policies overly complex and unsuitable for customers. Moreover, entities compete based on financial strength, price, brand reputation, services offered and customer relationships. Dissatisfied customers may reduce or avoid insurance coverage, potentially leading to negative financial outcomes such as personal bankruptcies. While financial regulators continue to emphasise consumer protection and accountability, entities that maintain transparent policy terms and sell products to customers best suited to them may better maintain their brand reputation, avoid regulatory scrutiny and protect shareholder value. Failure to inform customers about products in a clear and transparent manner may result in increased consumer complaints, customer churn, or regulatory fines and settlements.

Labour Practices

Labour Practices
Collective agreements cover many workers in the Airlines industry and guide fair wage discussions, safe working conditions and freedom of association, which are among basic worker rights. The organising of essential personnel and increased wages or benefits may result in higher labour costs. At the same time, labour practices may affect long-term business profitability. Effective management of, and communication associated with, issues such as worker pay and working conditions may prevent conflicts with workers that could result in extended periods of strikes, which may slow or suspend operations and damage an entity’s reputation, potentially reducing revenue and market share.

Product Design & Lifecycle Management

Incorporation of Environmental, Social and Governance Factors in Investment Management
Insurance entities must invest capital to preserve accumulated premium revenues equivalent to expected policy claim pay-outs and maintain long-term asset-liability parity. Because environmental, social and governance (ESG) factors increasingly have a material impact on the performance of corporations and other assets, insurance entities increasingly must incorporate these factors into their investment management. Failure to address these issues may diminish risk-adjusted portfolio returns and limit an entity’s ability to issue claim payments. Entities, therefore, should enhance disclosure on how they incorporate ESG factors, including climate change and natural resource constraints, into the investment of policy premiums and how they affect the portfolio risk.
Policies Designed to Incentivise Responsible Behaviour
Advances in technology and the development of new policy products have allowed insurance entities to limit claim payments while encouraging responsible behaviour. The industry is subsequently in a unique position to generate positive social and environmental externalities. Insurance entities can incentivise healthy lifestyles and safe behaviour as well as develop sustainability-related projects and technologies, such as those focused on renewable energy, energy efficiency and carbon capture. As the renewable energy industry continues to grow, insurance entities may seek related growth opportunities by underwriting insurance in this area. Additionally, policy clauses may encourage customers to incorporate environmental, social and governance (ESG) factors to mitigate overall underwriting portfolio risk, which may reduce insurance pay-outs over the long term. Therefore, disclosure on products related to energy efficiency and low carbon technology, as well as discussion of how entities incentivise health, safety or environmentally responsible actions or behaviours, may assist investors in assessing how insurance entities incentivise responsible behaviour.
Financed Emissions
Entities participating in insurance activities face risks and opportunities related to the greenhouse gas emissions associated with those activities. Counterparties, borrowers or investees with higher emissions might be more susceptible to risks associated with technological changes, shifts in supply and demand and policy change which in turn can impact the prospects of a financial institution that is providing financial services to these entities. These risks and opportunities can arise in the form of credit risk, market risk, reputational risk and other financial and operational risks. For example, credit risk might arise in relation to financing clients affected by increasingly stringent carbon taxes, fuel efficiency regulations or other policies; credit risk might also arise through related technological shifts. Reputational risk might arise from financing fossil-fuel projects. Entities participating in insurance activities are increasingly monitoring and managing such risks by measuring their financed emissions. This measurement serves as an indicator of an entity’s exposure to climate-related risks and opportunities and how it might need to adapt its financial activities over time.

Physical Impacts of Climate Change

Physical Risk Exposure
Catastrophic losses associated with extreme weather events will continue to have a material, adverse effect on the Insurance industry. The extent of this effect may evolve as climate change increases the frequency and severity of both modelled and non-modelled natural catastrophes, including hurricanes, floods and droughts. Failure to appropriately understand environmental risks, and price them into the underwritten insurance products, may result in higher-than-expected claims on policies. Therefore, insurance entities that incorporate climate change considerations into their underwriting process for individual contracts, as well as the management of entity-level risks and capital adequacy, may be better positioned to create value over the long-term. Enhanced disclosure of an entity’s approach to incorporating these factors, in addition to quantitative data such as the probable maximum loss and total losses attributable to insurance pay-outs, may provide investors with the information necessary to assess current and future performance on this issue.

Competitive Behaviour

Competitive Behaviour
The Airlines industry is characterised by competitive margins because of high fixed capital and labour costs and competition with government-subsidised carriers in some markets. Airlines often seek cost savings using economies of scale with alliances or consolidation, which may result in market concentration. The industry also has high barriers to entry because of limited landing rights and increasing airport congestion. Together, these characteristics may encourage entities to engage in anti-competitive practices that increase consumer prices. As a result, antitrust authorities have scrutinised some airline industry practices such as airport slot management, predatory pricing, and alliances and mergers. Legal fees, reputational risk, delayed merger or acquisition transaction costs, and limits to growth through acquisition or merger may create material risks for investors.

Critical Incident Risk Management

Accident & Safety Management
Air travel accidents may result in significant consequences. Passenger safety is paramount in the Airlines industry. Although air travel is one of the safest transport modes, airlines are held to very high safety standards, and consumers expect accident-free operations. Furthermore, since products transported by air tend to be high-value or perishable goods, delivering them safely and in a timely manner is a priority for any carrier. Airline accidents may result in significant environmental and social externalities and require entities to pay for remediation and victim compensation. Safety incidents or violations of safety regulations may affect an entity’s reputation, increasing its risk and cost of capital, resulting in reduced consumer demand and revenues. Even if they occur rarely, larger accidents may result in significant, long-term effects on brand value and revenue growth. Providing adequate employee safety training and ensuring the health and well-being of crew members is critical to ensuring safety. Timely and competent aircraft maintenance may minimise the chances of technical failure and regulatory penalties for non-compliance.

Systemic Risk Management

Systemic Risk Management
Entities in the Insurance industry have the potential to pose, amplify or transmit a threat to the financial system. The size, interconnectedness and complexity of entities highlight the industry’s exposure to systemic risk. Regulators have identified entities that engage in non-traditional or non-insurance-related activities as being more vulnerable to financial market developments and subsequently more likely to contribute to systemic risk. As a result, entities may be designated as Systemically Important Financial Institutions. Central banking systems in various jurisdictions may subject such entities to stricter prudential regulatory standards and oversight. Such entities may face stricter limits on their risk-based capital, leverage, liquidity and credit exposure. In addition, regulators may require entities to maintain a plan for rapid and orderly dissolution in the event of financial distress. Regulatory compliance can be costly, and failure to meet qualitative and quantitative regulatory performance thresholds could lead to substantial penalties. To demonstrate how these risks are being managed, entities should disclose important aspects of their systemic risk management and their ability to meet stricter regulatory requirements.

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