ESG mandates and AI-washing create two new frontiers of personal liability for executives
As more countries introduce mandatory ESG reporting, directors and officers face growing exposure to investigations, enforcement fines, and private litigation over non-disclosure or misrepresentation of sustainability commitments. "Expanding disclosure and reporting regimes — particularly in Europe and other major markets — are elevating expectations around transparency, climate strategy, supply chain oversight, human rights, and workforce governance," Schlesinger says. In the UK, scrutiny of ESG and AI disclosures is intensifying; in the US, Securities and Exchange Commission enforcement actions are on the rise.
Artificial intelligence has introduced a parallel and fast-growing liability. Beena Ammanath, executive director of the Global Deloitte AI Institute, identifies a widening gap between what companies claim about their AI capabilities and what they are actually implementing — a misalignment that can trigger regulatory scrutiny, securities litigation, and shareholder actions. "Boards are increasingly accountable for a widening set of AI-related risks," she says, citing "model inaccuracies and hallucinations to IP leakage, privacy breaches, bias, ethical lapses, and cybersecurity exposure."
A specific variant of this risk — AI-washing — is drawing particular attention. This involves companies making vague "AI-powered" claims without evidence, inflating descriptions of automation or risk controls, or masking manual processes behind the language of machine intelligence. "We’re seeing an uptick in scrutiny in this area," Ammanath says, adding that the reputational damage from weak AI governance can escalate quickly.
Boards and insurers tighten governance and coverage as the era of cheap D&O ends
The cumulative weight of these exposures is forcing a reset in how boards govern and how insurers price risk. "Coverage is broadening," says Mark Sutton, senior equity partner at Clyde & Co. "We’re slowly seeing D&O policies evolve to reflect a more complex regulatory environment, and underwriting discipline is tightening." After years in which D&O premiums declined steadily, that trend is now flattening and, in some regions, reversing.
Boards are responding by strengthening governance and improving disclosure practices, with particular emphasis on ESG and technology. Many are enhancing scenario planning and crisis response capabilities to manage regulatory and geopolitical shocks, Sutton notes. Insurers, meanwhile, are collaborating more closely with clients to improve transparency, refine risk controls, and tailor coverage to emerging exposures — shifting the emphasis toward proactive risk management rather than reactive claims handling.
For AI-related risks specifically, Ammanath recommends that companies establish a formal AI governance program with clear board oversight and defined accountability across the AI lifecycle, embed responsible AI practices into processes and training, and implement model risk management that includes risk assessments, validation, and continuous monitoring. Schlesinger urges companies to integrate geopolitical intelligence into their broader risk management and supply-chain resilience frameworks, and to maintain open communication with both internal and external stakeholders.
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