Insurance Asset Risk Awards 2023 - UK & Europe

Championing responsible investment

Erin Bigley, chief responsibility officer at AllianceBernstein (AB), discusses the issues insurers should consider when choosing the right asset management partner to help them meet their responsible investment goals.

What challenges do insurers typically face with sustainability goals?

Erin BigleyInsurers have a unique opportunity to contribute to sustainability, but the ESG space is rapidly developing and evolving, which can pose challenges along insurers' journey to implement sustainability goals.

The first challenge starts at the top—defining the organisation's sustainability goals. There are resources that can help, including the Net-Zero Asset Owner Alliance and Net-Zero Insurance Alliance target-setting protocol. But there's a critical need to be consistent across the investment and underwriting sides of the business, ensuring that objectives on one side aren't contradicted by actions on the other.

Once organisational sustainability goals are set, identifying the right asset management partners to help achieve them requires an in-depth assessment. In our view, there are two key questions to answer: Does an asset manager's philosophy align with the insurance company's own philosophy? And does the manager possess the investment and reporting capabilities required to meet the insurer's objectives?

The need for accurate and timely reporting highlights another commonly cited issue: data. The quality of data for managing and reporting on sustainability characteristics is critical—and its availability and quality is improving rapidly. However, the coverage and consistency of data across managers remains a challenge.

Finally, regulation and disclosure requirements, which have many long-term benefits, can prove difficult to establish in the short term from both resourcing and data perspectives.

What are the main trends in sustainable investing right now?

We're seeing an appetite for the following types of strategies:

  • Climate strategies that are more targeted in nature—not simply low-carbon strategies, but those focusing on companies in transition or providing solutions that enable other companies to decarbonise. AB's new China Net Zero 2060 strategy and Sustainable Climate Solutions fit those profiles.
  • Strategies that focus on improvement in ESG profiles. As the world of ESG broadens, more clients are recognising the need for change and the role an asset manager can play in driving it. Rather than simply rewarding the "best of the best," clients are seeking strategies that allocate capital to companies committed to improving on ESG, particularly where the asset manager has a heavy engagement focus. AB's Global ESG Improvers and China Net Zero 2060 strategies capture this trend.
  • More specific thematic strategies. The topic of diversity and inclusion is gaining more and more traction, and AB's new diversity champions strategy is designed to direct capital toward that end. Biodiversity is another topic that clients are increasingly discussing, and AB is exploring how to best address this issue.

What is AB's strategy in the sustainable investment sector?

We've focused on broadening our suite of ESG-focused offerings in recent years to satisfy clients' growing demand for purpose-driven strategies. Our early efforts focused on sustainable thematic equity strategies – investing in companies that offer products or services aligned with the United Nations Sustainable Development Goals (SDGs).

We've broadened our offering since then to include different asset classes, such as SDG-aligned and climate-focused fixed-income strategies that encompass high-yield and emerging-market debt, as well as alternatives, such as private-market strategies focusing on clean energy. We've also launched other thematic strategies, such as a DEI-focused equity strategy, and we expect to continue innovating and expanding our Portfolios with Purpose into new market segments and themes.

AB has been managing assets for insurance companies for many years, with extensive experience in responsible investing. We're very excited to partner with insurance clients, helping them meet their responsibility goals and to advance our respective commitments to responsibility.