The weight of ESG (environmental, social, and governance) in the investment choices of insurance companies is growing. The “Ready, Set, Reset” report published by Goldman Sachs Asset Management (Gsam), the asset management division of the Goldman Sachs Group with $1.6 trillion in assets under management, confirmed the trend.
The results of the ninth annual report on the global insurance industry showed continued growth in the importance of ESG factors for companies globally. In 2017, the majority of respondents (68 percent) did not believe that sustainability factors should be taken into account in their investment decisions or, in any case, did not think they were applicable to their investment processes. However, in 2020, the proportion of those who considered ESG parameters to be “lateral” decreased to 21 percent. Another interesting result concerns the gaps in ESG data, detected by 95% of insurers who indicate, in this sense, the presence of “obstacles to overcome.”
Gsam interviewed 273 Chief Investment Officers (CIO) and Chief Financial Officers (CFO) representing more than $13 trillion of assets, about half of the global insurance industry.
Find out more about the latest insurance report published by Goldman Sachs’ and read the latest business headlines with the Born2Invest mobile app.
EMEA and Asia-Pacific lead the ESG in insurance
In line with previous years, the weight of ESG factors in investment decisions continues to be more evident in the EMEA region (Europe, Middle East and Africa) Europe and the Asia-Pacific region, but there is also a steady increase in the Americas. Throughout the world, Gsam pointed out that the most widespread implementation still concerns negative screening.
At the regional level, however, the motivations related to the use of ESG, change. While portfolio risk mitigation occupies a prominent position in the investment decisions of insurance companies in the Americas and the EMEA region, it takes a secondary position in Asia-Pacific, where insurers give greater weight to shareholder and creditor considerations.
Although a minority of respondents indicate climate risk as a “primary consideration,” it is present in the investment process in 73% of cases in the EMEA region (followed by 72% in Asia-Pacific and 53% in the Americas). In addition, the vast majority of global respondents expressed interest in using climate stress testing and scenario analysis to measure their portfolio’s exposure to future climate risks. In Europe, about a quarter of all respondents would use this analysis as their primary assessment tool.
The pandemic accelerated the trends towards ESG inclusion in the strategy of insurance companies
Other conclusions from this year’s survey include how insurers have made minimal long-term changes to their investment strategies, many of which have reduced portfolio risks related to high valuations and credit cycle concerns. “Before the COVID-19 pandemic, many insurers were aware that the business cycle was too long and, as a result, they were preparing to manage volatility,” said Michael Siegel, Global Head of Insurance Asset Management at Gsam. “This year’s events have accelerated the already established investment trends we have observed throughout the market.”
In the months leading up to the “revolution imposed by COVID-19”, the IACs had reported the continuity of growth trends in the private equity, private credit and securitized assets segments at the expense of reduced exposure to cash, government bonds and hedge funds. The Gsam survey showed that not only should these trends continue, but they could even accelerate. Interest in the private market is increasing, while 60% of the respondents stated that they invest in the insurtech sector, an increase of 14% compared to the previous year.
Finally, among other noteworthy results, there was an increase in investment in ETF (58%) led by European insurers.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in ETicaNews, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
International Freight, the First Witness to the Fractures of Globalization
After years of globalization, fractures are beginning to emerge, particularly in the global shipping industry. But, while we might be...
Times of Easy and Tight Money: 1954 to 2022
As the FOMC reduced its “liquidity injections” in February, market valuations began deflating. And then this week, following a huge reduction...
The Bear Market’s Over and Inflation’s Slowing, Right?
Looks like the bear market's over and inflation's finally halting. Happy days, right? Not so fast; it's time to exercise...
The Jewel of the Crypto Winter: Digital Tokens Backed by Viable Products
The crypto winter that's taken over the market in the last few months has been brutal. Besides tanking prices, there...
What’s New in the Neo-banking Scene in Switzerland?
Swiss neo-banking is becoming increasingly similar to foreign competitors in their product offerings and features. Many are now mimicking the...