Enhancement refers to the systematic integration of ESG criteria along the entire investment process, from the Strategic Asset Allocation (SAA) to monitoring and reporting. Today, close to 100% of our SAA considers ESG aspects.
As part of our active risk management, we announced in 2017 that we had switched to ESG benchmarks consisting of better-rated companies from an ESG perspective for our actively managed listed equities and corporate credit portfolios. Limited leeway for deviations is given, whereby such investments are required to have either a positive ESG trend or provide compensation for the underlying ESG risk. The implementation of these benchmarks allows us to have both the right measurement and appropriate incentives for our portfolio managers in place. If benchmarks are not applicable, for example for our buy-and-hold credit or our government bond portfolios, minimum ESG rating thresholds are applied to our mandates.
Infrastructure is an attractive asset class for our investment portfolio given its credit quality and inherent liquidity premium. Our infrastructure investments are assessed against a catalogue of ESG parameters to evaluate the underlying sustainability risk.
New investments in private equity are only made into funds that adhere to ESG guidelines and we review ESG performance and compliance for each potential investment.
For our real estate investments, new properties are evaluated from an ESG perspective, which includes both a property’s current and potential future status as it relates to energy efficiency, public transport connectivity, use of sustainable materials, occupier well-being and community engagement. Ongoing business plan execution and asset management of properties already in the portfolio always incorporate different ways to improve ESG characteristics, as economically and financially sensible.