30 September 2015

Zurich pledges 10% of its PE allocation to impact investments

Zurich Insurance Group is to invest up to 10% of its private equity investments in so-called impact investments.

The company will be investing with private equity fund managers whose investment strategies are expected to generate positive social and environmental outcomes, and "who are willing to report on non-financial impact metrics," the insurer said.

Zurich expects these funds to total $100m by the end of 2015.

Zurich explained that this commitment is a further step towards delivering Zurich's responsible investment strategy. Through its impact investing strategy for private equity, Zurich expects to help mitigate environmental risks by supporting a low-carbon economy and encouraging environmentally friendly technologies; and "to increase community resilience by helping to build community capital and address the needs of populations that lack traditional means to achieve such goals."

The insurer said it will identify private equity funds "whose investment strategies directly address those issues while at the same time target commercial financial returns, and will invest, based on a commercial due diligence process, with private equity fund managers willing to report on their non-financial impact."

Urban Angehrn, chief investment officer, said: "Our vision is of a future in which we will have a much better understanding of the social and environmental impacts – both positive and negative – of the companies and assets in which we invest, allowing us to achieve positive impact and superior risk-adjusted returns.

"With impact private equity we can do this already today, at least for one small part of our portfolio. Our hope is to help make this approach more mainstream in the coming years."

Zurich already works with two impact fund managers – Ambienta, a fund manager targeting investments in resource efficiency and pollution control, and LeapFrog Investments, a fund manager investing in financial services for low-income populations in emerging economies.

The insurer seeks to manage its investment portfolio of approximately $200bn in assets in a way that generates both superior financial returns and a positive impact. The insurer has committed to investing up to $2bn in green bonds, the largest such commitment globally, and has already reached $750m of that total.

It has also committed to reduce greenhouse gas emissions on $5.5bn of its real estate portfolio by 20% by 2020 compared with 2010, and to integrate environmental, social and governance factors into all its relevant investment processes.