Responsible investing in practice
Our investment philosophy centers on the principle of Asset–Liability Management (ALM) with the aim of generating long–term, sustainable returns. The strong integration of Environmental, Social and Governance (ESG) criteria is critical in achieving this goal.
As an early adopter of sustainable investing, we formalised our commitment to this practice in 2007 by signing the UN-supported Principles for Responsible Investment (PRI), an initiative in partnership with UNEP Finance Initiative (FI) and the UN Global Compact. In 2012 Swiss Re became a signatory to the UNEP FI Principles for Sustainable Insurance.
Our approach to ESG integration is built on three strategic pillars:
Our primary goal is to integrate ESG practices across the entire portfolio. We are convinced that ESG integration makes economic sense as it leads to a better risk/return profile. As part of our continuous improvement, we are switching to benchmarks composed of higher ESG rated companies for our listed equity and corporate bond portfolios. This allows us to have both the right measurement as well as appropriate incentives for our portfolio managers.
Our approach to selecting and monitoring external investment managers is a further component to ensuring that ESG factors are consistently integrated in our investment process. All our external managers are required to adhere to responsible investing criteria and are monitored accordingly. Aside from transparency, this monitoring ensures ongoing engagement and dialogue in all matters concerning responsible investing. For our internally managed portfolios (primarily short-term investments, and government bonds), we consider and monitor ESG criteria in a similar way.
ESG considerations also form the basis of Swiss Re's voting guidelines applied to our equity holdings. The external investment managers need to meet our voting principles and, we regularly assess the managers' voting guidelines against these principles. Furthermore, they are required to report periodically on their voting decisions.
Swiss Re takes a major role in the climate change debate; hence, this is also an important topic for our investment approach. We continue to build up our portfolio to support a transition to a low carbon economy. Find out more under "Climate Change – from Strategy to Activity".
Swiss Re's strong commitment to sustainability is defined in our Sustainability Risk Framework, as well as in our Responsible Investment Policy. The Sustainability Risk Framework sets company-wide criteria for what is being considered as acceptable business.
Additionally, we avoid investments in companies with substantial revenues from, or usage of thermal coal as well as substantial revenues from tar sands operations as part of our risk managing approach.