One of Europe’s biggest insurers is shifting its investments towards socially responsible companies.
Swiss Re, a strategic partner of the World Economic Forum, is moving its €130 billion investment portfolio to target businesses that meet specific ethical benchmarks.
While the firm is the first insurer to shift its entire investment portfolio in this way, the move shows a resurgence of social responsibility in the industry. In 2016, Axa announced plans to divest €1.8 billion of tobacco investments, because of its impact on public health and the firm’s moral conflict as a health insurer.
Swiss Re will use environmental, social and governance (ESG) indices set by investment analysis and research firm MSCI and hopes to inspire other companies to take ESG criteria into account.
"With $75 trillion of institutional assets under management worldwide, the impact of more institutional investors following the Environmental, Social and Governance (ESG) Criteria would be a big step in making the world more resilient," said Guido Fürer, Chief Investment Officer at Swiss Re.
“It is more than doing good — it makes economic sense,” he added in an interview with the FT.
Katherine Brown, Head of Sustainable and Impact Investing at the World Economic Forum, noted that this week’s development was part of a larger trend.
“Swiss Re’s decision comes at an exciting time for sustainable investing. In the last years, a slew of institutional and private players have made public commitments towards more responsible investment strategies," she said.
"It’s part of a much-needed shift towards long-term thinking. Companies that, say, fail to protect the environment may flourish in the short term, but they present a long-term risk if regulation catches up with them or if consumers turn against them. Responsible investment means less volatility.”
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While the returns from this newly focused portfolio are expected to be slightly lower, Swiss Re research suggests they will be more stable.
“Data suggest that taking a long-term view on responsible investing is at least as much about limiting downside risks as benefiting from upside potential,” according to a report from the insurer.
The Swiss insurer will not divest any existing investments in order to give companies time to adapt to the new model.
“There is a social cost to putting a company outside the investment spectrum. There are people who work there and if a company can’t fund itself, it can’t employ so many people,” Fürer told the FT.