Abstract
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.