Case Study: Zurich Insurance Group

An insurance company broadly integrates sustainability criteria into its investment processes.

Information on the organisation

Type of organisation Insurance Assets under Around CHF190 billion management (as of 31.12.2016) Approximate asset Asset allocation by asset class: allocation (as of Bonds and other fixed-income securities: 80% 31.12.2016) Equities: 6% Real estate: 6% Alternative investments: 2% Cash: 4%

Information on sustainable investment policy

Who initiated the The initiative came from the Chief Investor Officer, who drafting of a sustainable commissioned the development of a Responsible Investment stratinvestment policy? egy. This was submitted to the Executive Committee and the Board of Directors and approved in the spring of 2012. What was the main The primary motivation was financial: Systematically integrating motivation for this step? sustainability into the investment processes can reduce risks and create new investment opportunities. At the same time, however, the aim is to actively contribute to a more sustainable economy in general and the financial industry in particular—in other words, to achieve a positive impact. It is also expected that a sustainable investment approach is welcomed as a positive step by employees and other stakeholders. What are the main The sustainable investment strategy is based on the following three components/content pillars: of the sustainable • ESG integration investment policy? • Impact investing • Cooperation with others on the continuous development of sustainability as a theme ESG integration forms the core and covers both internally (1/3) and externally (2/3) managed funds. It is implemented for all asset classes apart from government bonds and hedge funds. For impact investments, the focus currently is on green bonds and private equity with impact. To promote sustainability in the financial services industry, Zurich Group is an active member of such organisations as PRI, Green Bond Principles, Cambridge University’s Investment Leaders Group, and the Global Impact Investing Network.

How was the sustainable investment policy implemented?

What resources have been deployed for this?

What were your experiences with the policy implementation?

What were notable difficulties?

What do you consider to be the main benefits of your sustainable investment policy? To implement ESG integration, concrete elements were defined that each investment team must implement independently, with the support of the central Responsible Investment team: 1) Educate and sensitise all employees about sustainability. To this end, an online training module was developed and internal courses were organised. 2) Access to data and analyses: sustainability ratings were integrated into the internal data platform, and portfolio managers receive access to ESG research and data from an external service provider. 3) Integration into the investment process: ESG themes are integrated into investment meetings and risk reporting. 4) Active Ownership: A strategy for the active exercising of voting rights and for active dialogue with companies is currently being implemented. All four elements are also being fully integrated into the selection criteria, contracts, and monitoring of external asset managers. A two-man Responsible Investment team manages and coordinates the implementation of the sustainable investment strategy. The ESG research is provided by a suitable data provider. For training, employees must not only use internal courses but also the PRI Academy. The implementation of a sustainable investment strategy is a process that requires a change in the investment culture. This naturally takes a lot of time and it is important for the Responsible Investment team to work closely with those implementing the strategy to provide the necessary support. Thanks to the clear commitment to the sustainability strategy shown by the Executive Committee and the Board of Directors, as well as a very market-based implementation, there was hardly any resistance to the introduction of the policy. The implementation of the comprehensive strategy requires the deployment of substantial resources and it takes time for this approach to be applied across all areas. Since all investment teams are individually responsible for implementation, their sense of responsibility needs to be strengthened and they need to be sensitised to the topic: They need to be given suitable training and the right incentives need to be created. Sustainability goals are therefore systematically integrated into individual target agreements. To encourage the right skills, sustainability expertise was also included in job postings. The strategy is based on the conviction that the integration of sustainability improves the risk/return profile. However, this is almost impossible to prove in quantitative terms because there is no control group in the implementation phase. The integration of sustainability also has a positive impact on the company’s reputation. This makes it easier to recruit motivated staff: Many employees are proud of the sustainable approach. And last but not least, the implementation makes a concrete contribution to a more sustainable world.