Insurers act as institutional investors and underwriters of risk. Therefore, improving their environmental, social, and governance (ESG) performance is important for the transmission of ESG values to all economic sectors. We analyze ESG scores of worldwide Property and Casualty (P&C) insurers during 2013–2022 and show that more sustainable insurers have high operating leverage despite appearing to be financially stable from their combined ratios and z-scores. Additional results for the US subsample illustrate that stocks issued by sustainable insurers deliver positive excess returns. Overall, these findings suggest that there is a significant association between sustainable practices and the ability of insurers to execute business and create value. This is important for insurance managers, investors, and policy makers, as insurers play a prominent role in promoting economic growth and stability.

We empirically study the environmental impact of banks, i.e., the negative externality on the environment and society deriving from the use of a natural resource or the emission of a pollutant. We find that environmental “impact ratios”, that is, environmental damage costs in proportion to total revenues are negatively correlated with bank profitability. Furthermore, banks with a stronger impact on the environment are valued less by equity market investors and pay less cash to shareholders. Among environmental categories, potential damage from greenhouse gas emissions or waste seems to be especially severe. We provide important insights for banks’ environmental management. If bankers can address businesses and practices to be more renewable and lower in their emissions, they could improve both the operating and the market performance. Thus, firms would be financially more stable and could react smoothly to the recent introduction of stricter and onerous environmental regulations.

The growing concerns about sustainability urge insurance companies to implement Environmental, Social, and Governance (ESG) policies in order to remain competitive. All the three dimensions of corporate sustainability involve taxation; therefore, it is important to establish if this association reflects on financial performance. Our analysis of worldwide property and casualty (P&C) insurers during 2013–2022 reveals that high ESG insurers pay more taxes, while they are less profitable compared to low ESG insurers. This pattern is confirmed using instrumental variable regressions and simultaneous equations systems. We argue that sustainable insurers are less tempted to avoid taxes and do not shift their tax burdens onto policyholders and investors. However, the interplay between taxes and sustainability seems to harm insurers’ profitability, potentially having negative effects on investment and economic growth. This is an important insight for tax authorities and insurance managers.

Insurance companies strive to incorporate environmental, social, and governance (ESG) in their businesses, as managers recognize that strong ESG performance is necessary to guarantee access to capital and enhance company value (Di Tommaso & Mazzuca, 2023; Eling, 2024). This article focuses on the moderating role of ESG in determining insurers’ profits, analyzing a panel data set covering insurance companies worldwide during the period 2013 to 2024. The results reveal that high ESG ratings amplify the association of profits with underwriting premiums while weakening the dependence of profits on investments. Additional outcomes show that ESG has an effect on the composition of the investment portfolio, inducing insurers to have larger shares of assets invested in debt securities than in equity-type securities. These findings are important for insurance executives, providing deeper insight into how the improvement of ESG dimensions impacts profits from separate channels, while also having an influence on investments. Understanding the dynamics of insurance profits is relevant from a supervisory perspective, too, as a sound and well-performing insurance sector is crucial to preserve stability at the systemic level.