Specific approaches per asset class
In addition to the overarching approach described above, we have identified some key investment areas in which we apply further, specific ESG criteria to cater for the different risk characteristics of responsible investing. These key investment areas include rates products, credit products, equities and real estate:
Rates products2 constitute the largest asset class in our investment portfolio, with a share of 51% at the end of 2015. At 39% of total assets under management, government bonds (incl. agency) are the largest holding within rates products.
At a country level, we have implemented political risk and sustainability assessments to guide our responsible investment decisions and to guarantee the quality of our government bond portfolio in this respect. Our rates products portfolio is screened against such political country risk and sustainability rating considerations on a semi-annual basis. Furthermore, the rating measures are used to define investment mandates for our portfolio managers.
Sustainability and climate change are essential topics for us. We actively contribute to financing a more low carbon economy by investing in the growing SSA3 green bond market, primarily relying on the “Green Bond Principles”.
Political Country Risk Rating
The Political Country Risk Rating comprehensively measures the political risk in a country, which is defined as events of a political, economic or social nature that harm business operations or adversely affect the business climate. The overall country score is derived from multiple external and internal data sets and Swiss Re’s expert assessment.
The Sustainability Rating, a derivative of the Political Country Risk Rating, measures the overall social, environmental and human rights situation in a country, and supports Swiss Re’s alignment with relevant United Nations principles.
Credit products, equities and hedge funds
At the end of 2015, more than 40% of our investment portfolio was managed externally. This portfolio comprises mainly credit products, equities and hedge funds. PRI signatories manage approximately 95% of these assets. Additionally, all of Swiss Re’s external asset managers have contractual provisions with Swiss Re that are specifically related to responsible investing.
We work closely with the external managers to ensure they consider ESG aspects in their investment processes. Before external managers are appointed, Swiss Re performs thorough due diligence to confirm their compliance with our responsible investment principles. This includes ESG considerations in investment decisions and monitoring, as well as a review of their commitment to responsible investing. After being mandated, the managers’ individual performances are monitored in line with our Responsible Investment Policy, and they are required to report regularly on their responsible investment activities.
For more systematic and regular monitoring of the actual integration of ESG factors into our externally managed portfolio, we have engaged the services of a leading ESG research company. We apply their ratings to our investment portfolio to assess the quality of the portfolio and gain further insight into ESG risk exposures.
As part of our commitment to sustainability, we also invest in related assets like green bonds in our credit mandates, and renewables and social infrastructure in our infrastructure private debt mandates.
Our investment portfolio consists of direct investments in property, principally in Switzerland and in Germany, as well as in the US. Comprising buildings for residential, industrial and commercial use, the market value of the portfolio was USD 3.2 billion at the end of 2015.
We apply ambitious sustainability standards for these real estate investments. For projects in Switzerland, the applicable criteria are defined in the Energy Mission Statement of Swiss Re. This stipulates that all new buildings need to conform to the MINERGIE® standard (www.minergie.ch), a Swiss quality label specifying high levels of energy efficiency and superior user comfort. When an existing building in the portfolio is due for renovation, this standard is applied whenever it is feasible from an architectural, technical and financial point of view.
By the end of 2015, the combined value of our MINERGIE®-certified buildings reached USD 0.4 billion, or 21.4% of our Swiss portfolio of direct real estate investments. The total energy consumption surface in accordance with the MINERGIE® standard was 82 497 m2 at the end of 2015. In addition, more than 56 000 m2 was sold on to third parties in previous years.
A new building with 16 apartments, which will meet the MINERGIE® standard, is currently under construction. Completion is expected in 2016.
2 Rates products consist of cash, short-term investments and government bonds (including agency).
3 Sovereign, Supranationals and Agencies