How we engage
In 2020, we exercised 95% of our voting rights of our listed equity mandates. We voted on 4 807 voting items through our external managers. We voted in line with the respective management resolution recommendation in 4 225 cases (88%) and against it in 457 cases (9%). In 121 cases (3%), we abstained from voting. The remaining votes were withheld.
In addition to shares in listed companies, investments in our equities portfolio include equity exchange-traded funds (ETFs). The fund managers cast votes on these ETFs in line with their own voting policies and processes.
In 2020, we implemented our newly developed Engagement Framework, to support our investee companies in strengthening their business performance and achieving shared long-term goals for responsible investing.
We believe that engagement with the real economy is an integral part of our contribution to limiting global warming to 1.5°C. Through our Engagement Framework we aim to encourage companies to develop a climate strategy and formally define how they can manage related risks, ultimately preparing them for the transition to a 1.5°C economy. To this end, the newly created framework aligns well with our own commitment to transitioning to a net-zero economy and the Net-Zero Asset Owner Alliance’s Target Setting Protocol.
The framework covers two engagement topics, “Improving Transparency: Disclosure of ESG Key Metrics” and “Alignment of Business Model with 1.5°C Target”. It needs to be applied to all actively listed equity mandates in order to further integrate sustainability and, in particular, climate change considerations into investment portfolios. We consider these activities to be relevant to advance the transition of the real economy, as this benefits our portfolio by further reducing the risk of assets getting stranded. Standardised disclosure will increase transparency and hence enable investors to make better-informed investment decisions.
We work closely with our investment managers to execute our two engagement topics for each of our portfolio companies. Regarding engagement frequency and desired outcomes we have set targets. These allow us to monitor progress in a structured way. The framework also takes into account regulatory requirements such as the Shareholder Rights Directive 2017/828 (SRD II).
In 2020, the investment managers of our actively listed equities portfolio started to engage with 45% of our holdings on the first topic, and with 48% on the second topic. Several of the companies we engaged with were prepared to make progress in implementing the measures we had requested. In fact, by the end of 2020, between 20% and 30% of our portfolio companies had already implemented the measures asked for under the two topics.
Promoting responsible investing
Shifting the large institutional asset base towards sustainable investments would mark a big step forward in making the world more resilient. We therefore do not only collaborate with our investee companies but also with other key stakeholders to advance this process. As an example, we contributed to the European Commission’s Technical Expert Group on Sustainable Finance and specifically participated in the development of climate-transition and Paris-aligned benchmarks and of ESG reporting needs for benchmarks until the end of the mandate in September 2020. Furthermore, as part of relevant industry organisations such as the Swiss Insurance Association and Swiss Sustainable Finance, we also advise on sustainable financial market developments in Switzerland.
Knowledge sharing is another key aspect of promoting responsible investing. We offer all Swiss Re employees various internal ESG training opportunities to ensure consistent know-how across the Group. We also engage with other investors to foster greater appreciation of responsible investing as an investment approach.
We first formalised our commitment to responsible investing in 2007 by signing the Principles for Responsible Investment (PRI). We have once again been recognised by the PRI for our thought leadership, having our excellent assessment result from the previous year confirmed.
As a founding member of the UN-convened Net-Zero Asset Owner Alliance, we have committed to aligning our investment portfolio with the 1.5°C goal stated in the Paris Agreement by having a net-zero emissions investment portfolio by 2050. We have therefore co-led the development of the Target Setting Protocol (TSP), which allows the setting of reduction targets to be achieved by 2025. We are also represented in the Alliance’s Steering Group. Swiss Re has actively promoted the transition to net-zero emissions through the participation in WEF panels, explanatory videos and a podcast in which PRI and Swiss Re discuss the TSP.