ESG makes economic sense – online only
In 2018, Asset Management continued on its journey to integrate Environmental, Social and Governance (ESG) criteria into its investment process, now applying them broadly and systematically to nearly 100% of Swiss Re's investment portfolio.
ESG integration represents a natural fit for long-term investors such as re/insurance companies, given that sustainability risks usually materialise over a longer time horizon. For Swiss Re, integrating ESG criteria makes economic sense, as it improves the investment portfolio's risk-adjusted returns, while allowing us to contribute to a more resilient world overall.
Replacing our traditional Asset Management benchmarks with those that focus on higher ESG-rated companies has been Swiss Re's most meaningful step so far in our commitment to invest responsibly. Being among the first global re/insurance companies to have taken this step, we believe ESG benchmarks provide the right incentives for investment managers when selecting securities. Investing in companies with lower sustainability risks strengthens the resilience of our investment portfolio with respect to financial shocks.
Swiss Re's overall responsible investment strategy covers three pillars. The focus on better ESG rated companies falls under "Enhancement". Through the pillar "Inclusion," Asset Management focuses on investments intended to make a positive impact. The "Exclusion" pillar aims at avoiding investments with adverse ESG risks in specified areas that may transform into financial losses. Asset Management does not only avoid investments into thermal coal above a certain threshold, but it also applies a similar approach to tar sand-related companies.
In mid-2018, Swiss Re provided an assessment of its ESG implementation, illustrating our experience one year after the switch to ESG benchmarks titled "Responsible investments – The next steps in our journey". The publication also included a market update linked to our "wish list" featuring consistent and standardised company-level ESG reporting, among other aspirations. As joint public-private efforts are required to overcome these key impediments, Swiss Re participates as the only Swiss company in the European Commission's Technical Expert Group on Sustainable Finance. Swiss Re is convinced that such collaborations promote ESG among long-term investors and are therefore part of the solution to make the world more resilient.