Reinsurance is one of the more conservative disciplines in global finance. It is also one of the most forward-looking. Insuring the insurers demands the ability to envision long-term risks, as well as implementing an investment strategy that provides the growth and liquidity to pay claims. It doesn’t sound like a fast-moving industry, but it can move decisively. A recent change in Swiss Re AG’s investment strategy is one of those decisive moves, one that highlights the insurance industry’s long-term exposure to both the causes and effects of climate change.
Earlier this month, Swiss Re announced that it has been integrating environmental, social and governance considerations “into its investment process since the start of 2017.” Taking ESG criteria into account, it says, “makes economic sense and reduces downside risks especially for long-term investors.” Swiss Re’s release says that it has selected the MSCI ESG Index “family” and the fixed-income Bloomberg Barclays MSCI Corporate Sustainability Index “as part of their ESG investing needs.”
Why does it matter? The announcement is a bit dry (it’s an asset allocation announcement from a reinsurance firm), but the numbers are not: Swiss Re had $155 billion in assets at the end of 2016, and according to Reuters, it has already moved more than $110 billion of it into ESG funds.
There’s a lot more than just Swiss Re’s $155 billion in play. Munich Re had $240 billion in assets at the end of last year, and all U.S. reinsurance assets exceeded $800 billion in 2015.
Read more: bloomberg.com originally published on July 21st, 2017.