Data and reporting come up a lot when insurers talk about the challenges of implementing sustainable investment practices.
These challenges include both a lack of data and few common methodologies. You can see this in Figure 1 below, which was taken from our recent Sustainable Investment in European Insurance report.

Figure 1: Main challenges towards the implementation of sustainable investment practices. (size depends on # of respondents)

Source: abrdn ESG Insurance Survey, April 2021. For this survey we interviewed 60 insurance CIOs and heads of sustainability across Europe (covering 42% of European insurance assets under management).

The good news is many insurers highlight that the obstacles are gradually disappearing. Problems may remain, but the industry has come on leaps and bounds in recent years. For example, the EU’s new sustainable finance regulation is breaking down some of the remaining barriers – this increased standardisation should allow investors to assess their portfolios against a clear benchmark and improve comparability across the industry.

Meanwhile, as more insurers embark on the journey to net zero, they are going to need reporting that states clearly whether they are on the right path to meeting their targets. This will be important for their stakeholders, both internally and externally.

Emissions within a portfolio might easily be reduced in a manner that does not achieve the real-world impact many seek – missing the point of net zero. It’s therefore helpful to look at your portfolio from multiple angles. Of course, consider the carbon consumption of the portfolio, but also look at how active engagement is playing a positive role. And ask yourself, how is my asset manager analysing and rating portfolio companies’ environmental, social & governance (ESG) credentials? This is an area where we think we can help.

abrdn recently launched the ESG and Responsible Investment reporting tool, which aims to support clients by providing a regularly updated, standardised report.

And because we spoke to a number of clients when shaping this report, we believe we’ve put together something that can really help insurers overcome some of the barriers they may face when it comes to ESG investing.

Our report covers:

Portfolio ESG Analysis – We rate every holding in the portfolio based on our in-house ESG ratings. As part of their company research, our stock analysts evaluate ownership structures, governance and management quality. They also assess potential environmental and social risks companies may face in the future.

In addition, to complement our internal view, we provide you with an analysis of the fund and benchmark, using MSCI ESG ratings, as you can see below.

Figure 2: MSCI ESG Rating Distribution Fund

Source: abrdn Sustainable Investment Report June 2021. For illustration only. abrdn-derived averages based on underlying MSCI company ratings.

Portfolio Carbon Analysis – Here we show you the breakdown of Scope 1, 2 and 3 emissions relative to the benchmark on both a weighted-average carbon intensity basis and on an absolute basis. You can see an example of our weighted-average carbon intensity reporting below:

Figure 3: Fund Carbon Footprint

Source: Trucost. From abrdn Sustainable Investment Report June 2021. For illustration only.

Active Ownership - Our reporting here covers the key engagements made with portfolio companies’ management and, where appropriate, our voting activity. And we go further by providing a range of case studies showing our policies in action and describing how our engagements have affected our investment thesis.

Figure 4: Active Ownership

Source: abrdn Sustainable Investment Report, June 2021

As our approach to ESG issues evolves, we aim to provide you with market-leading client reporting and hope to play a positive role in supporting your sustainable investment journey.

Company/Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.