Insurer Zurich doubles SRI target and turns its attention to passive allocations

Leading insurer to establish a measurement framework to track impact

Insurance giant Zurich has ramped up its SRI efforts with a series of new commitments, including a doubling of its investment in the space.
Just a week after it pledged to tighten its coal restrictions – for both its insurance and investment activities – Zurich has said it will increase its impact investments from $2.6bn to $5bn. The commitment covers “various asset classes”, including green bonds – the main focus for Zurich so far with more than $2bn invested – social and sustainable bonds, and private equity funds. It also has energy efficiency and carbon savings targets for its entire Swiss real estate portfolio, although this is not included in the $2.6bn figure.

Zurich will also establish a “measurement framework” to track the impact of those investments, it said, with the aim of avoiding the equivalent of 5m tons of CO2 each year.

“We’re working out how exactly how to measure all of this, and how we use the data that’s available,” said Johanna Koeb, Head of Responsible Investment at Zurich. “That’s part of the marching orders we now have.”

Currently, Koeb says Zurich looks at the impact reports from green and social bonds issuers, as well as from its other impact investment classes, but a lack of standardisation in metrics and key performance indicators [KPIs] means it is difficult to aggregate those impact measurements across the full portfolio. A blanket, in-house assessment approach will enable this; although it is possible an existing external methodology could be selected as the basis for that.

“We’ve been looking around in the market, and we haven’t seen any other private sector financial company that’s working towards impact targets, so it feels very ambitious for us – to not only up the volume of impact investments, but to add this additional dimension of impact measurement.”

Many investors have begun ‘mapping’ their investments to the UN Sustainable Development Goals.Zurich is yet to follow in the trend, but Koeb told RI: “It is a logical next step and definitely something we will consider.”

All the moves come on the back of Zurich’s five-year SRI review, which took place earlier this year. The result is a new “action plan”, and its existing white paper on the topic will be updated to include its next steps in terms of targets and strategy

In addition to its impact investments, the changes also relate to ESG integration across Zurich’s broader allocations. “We expect those to be relatively moderate compared to the updates on the impact investing side, because that’s where we feel we can make a big difference,” said Koeb.

However, it will include Zurich’s first move towards integrating ESG considerations into its passive mandates. “Selectively, we’ll start to look at passive, because we haven’t been applying our ESG integrations that those investments yet,” explained Koeb, adding that there were no goals or timeframes around this element of the work – just initial exploration.

Finally, Zurich says it will ramp up its engagement with policymakers. It is not on the European Commission’s High Level Expert Group on Sustainable Finance, which has Christian Thimann, Group Head of Regulation, Sustainability and Insurance Foresight at Axa as its Chair, but Zurich has been vocal about what it would like from European policymakers in order to foster more sustainable financial markets.

“We learnt from the last year that policy advocacy is becoming more and more important. Policymakers should now have an ‘official’ place within our strategy and it’s great to see the attention coming out of that sector when it comes to wanting to move sustainable finance forward.”

Staying with insurers, Japan’s giant Japan Post Insurance Co. has become a signatory to the Principles for Responsible Investment (PRI)