04 December 2018
Investors should no longer talk about the obstacles to sustainable investing, but focus on the financial opportunities such investments provide, according to a panel of insurance investors.
Speaking at Insurance & Climate Risk EMEA, hosted by Insurance Asset Risk sister publications InsuranceERM and Environmental Finance, panellists said Environmental, social, governance (ESG) focused investments need to be more forward-looking if it is to make an impact in helping avoid the catastrophic consequences of man-made climate change.
Erick Dekker, chief investment officer for Mediterranean and Latin American at Axa, told the audience that as ‘buy and hold’ investors, insurers’ opportunities to change their investments to assets with greater impact, is limited.
Therefore it is critical to get things right from the start, he argued.
“For the next 10 or 20 years we need the best information to ensure we are buying the right bonds. If not, then we are just not going to end up financing the right sectors or the right companies to help [meeting the climate change mitigating goals].”
Also on the panel, Jelle van der Giesson, chief investment officer at NN Group, welcomed the European Commission’s proposal to create a taxonomy of what can be considered an environmentally sustainable economic activity.
This will bring more transparency and clarity around ESG investing, he said, however, he cautioned that if it were to set fixed parameters around what is green and what is not without accounting for the transition being made, it could have unintended consequences. “There is a risk that progress on transition not shown.”
For Hilde Jenssen, product manager of the fundamental equities team at Nordea Asset Management, one possible issue, is that investors are adopting easily marketable positions on climate change that don’t fully deliver on their stated goals of reducing the amount of carbon in the atmosphere.
For example, she pointed to German chemical company Linde, which while a large producer of carbon emissions, is reducing its emissions by 30m tonnes a year. “Focusing on CO2 emissions alone is not advised,” she said.
Michèle Lacroix, head of group investment office at SCOR, told the audience that there was concern among investors that the proposed taxonomy could lead to relabelling of assets that would put their value at risk.