Specific approaches per asset class
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. Asset class specific approaches towards sustainability are outlined in the following sections.
Rates products2 constitute the largest asset class in our investment portfolio, with a share of 51% at the end of 2016. At 37% of total assets under management, government bonds (incl. agency) are the largest holding within rates products.
In 2016, we revised our ESG screening approach at country level. We now include detailed information from a specialised research company on primary political risks, human rights, economic and environmental issues affecting the resilience of countries. Based on such factors, we assess our government bond assets to guide our responsible investment decisions and to guarantee the quality of our government bond portfolio. We screen our portfolio against ESG considerations twice a year. Furthermore, we use the rating measures to define investment mandates for our portfolio managers.
Credit products, equities and hedge funds
At the end of 2016, approximately 44% of our investment portfolio was managed externally. This portfolio comprises mainly credit products, equities and hedge funds. PRI signatories manage more than 97% of these assets. Furthermore, all of our external asset managers have contractual provisions with Swiss Re that specifically relate 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, we perform 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 the managers’ commitment to responsible investing. After being mandated, the managers’ individual performances are monitored in line with our Responsible Investment Policy and measured against ESG-related benchmarks. The managers 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. Every year, we conduct an in-depth assessment based on ratings provided by them to analyse the quality of the portfolio and to gain further insight into ESG risk exposures.
As part of our commitment to sustainability, we also invest in related assets like renewables and social infrastructure in our infrastructure private debt mandates, and green bonds in our credit and rates products mandates. For the latter, we rely primarily on the “Green Bond Principles”. For further information, please refer to swissre.com: Responsible investing in practice.
Our investment portfolio consists of direct investments in property in Switzerland, Germany and the US. It comprises buildings for residential, industrial and commercial use. The market value of the portfolio was USD 3.4 billion at the end of 2016.
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 2016, the combined value of our MINERGIE®-certified buildings reached USD 0.4 billion, or 22% 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 2016. In addition, more than 59 000 m2 had been sold on to third parties.
Since 2015, Swiss Re has also invested in the US real estate market, having now acquired a portfolio of 14 properties. The investment manager’s approach to sustainability includes “GreenGuide: Sustainable Property Operations”, a best practice guideline for sustainable and efficient real estate operations; “ULI GreenPrint Foundation”, a global environmental management platform; and “LEED Certification” from the USGBC.
2 Rates products consist of cash, short-term investments and government bonds (incl. agency).