ARC Ltd. Encourages & Exemplifies ESG Principles In Action
Ange Chitate, Chief Operating Officer, African Risk Capacity Limited (ARC Ltd.)
The recent spike in natural disasters across Africa due to climate change, has compromised the country’s water and food security, human health and biodiversity. While many organisations are taking up the international call to embrace ESG, this does not mean a country is providing a coherent response to climate impact.
African Risk Capacity Limited (ARC Ltd.) Chief Operating Officer Ange Chitate says long-term sustainability means being able to provide insurance to protect lives and livelihoods. “It’s about making sure that people can survive, are able to feed themselves, and can access basic requirements. It’s as simple as that.”
ARC Ltd. is the first parametric development insurer on the continent, responding proactively to climate-related disasters to build resilience and ensure food security. “We support governments and farmers with insurance against climate events, but we also have donor partners who partially pay premiums where necessary, which helps to promote financial inclusion,” Chitate adds.
She explains that several countries are buying insurance to protect people on the ground as they understand the impact of climate change, but unfortunately, many other African countries aren’t following suit. “This year, Zimbabwe, Zambia, Malawi and Mozambique have received payouts of over $60 million for the severe drought in Eastern and Southern Africa. This will cover approximately six million people.”
Sustainable DNA
ARC Ltd.’s commitment to ESG principles saw ESG research, rating, and data firm Sustainalytics award the company with the lowest risk rating among its global peers, taking factors such as climate change, regulatory risk, and reputational issues into account. The company’s score improved from 10.2 in 2022 to 5.7 in 2023, with its overall risk considered “negligible”.
“An ESG rating is similar to a Fitch rating — it tells our partners and other stakeholders that we’re transparent and aligned with best industry practice,” says Chitate. “We subject ourselves to an independent assessment to find out how we’re faring, where we could improve, and if we can fill any gaps.”
One of the gaps this assessment has identified for ARC Ltd. is around carbon emissions. Because its employees work remotely, the company has no control over their carbon emissions. ARC Ltd. has also had to consider its business travel habits and the impact it has on carbon emissions.
ARC Ltd. does have policies related to green procurement, asset management and more. “We apply an ESG lens at all times to ensure our model creates value, and ESG factors are integrated with our underwriting principles.”
The company prioritises diversity, equity, and inclusion, particularly around its supply chain, through its gender-integrated disaster risk management (DRM) operations and policies. In terms of governance, ARC Ltd. has a comprehensive set of policies and programmes to address bribery, corruption, fraud, conflicts of interest, money laundering, and more. It conducts due diligence regarding its counterparties, and screens and records all financial transactions.
She explains that assessors aren’t interested in just the policies, however, they want to see the evidence. “Policy should be a formalisation of what a company is already implementing. If you profess to pay your staff equitably, you will need to disclose your payroll. If an assessor identifies an area of high risk, it will be stricter the following year as your company has had an entire year to address the problem. If a gap is identified, we’ll make sure it’s smaller next year.”
By proactively supporting governments and farmers, ensuring financial inclusion, and maintaining stringent ESG standards and policies, ARC Ltd. shows how dedicated efforts can mitigate the adverse effects of climate change. As more African nations embrace these principles, the continent can hope for a future where resilience and sustainability go hand in hand, safeguarding lives and livelihoods.
