BlackRock’s Global Insurance Report found that 83 per cent of insurers said ESG factors were becoming increasingly important to their firm, with a particular focus on this issue from European firms. A total of 23 per cent cited of insurers rated environmental or climate change as a key macro risk to their asset portfolio, compared to 6 per cent in 2017. This report surveys 372 insurance and reinsurance executives across 27 countries who between them have assets under management of $7.8 trillion. Yet, despite this increased awareness of ESG factors, 70 per cent of insurers reported a lack of in-house expertise to model these variables. Additionally, as part of the survey research, in-depth interviews conducted by BlackRock revealed that even experienced ESG investors struggle at this point to integrate ESG at the overall portfolio level. Patrick Liedtke, head of BlackRock’s insurance asset management business in Europe, Middle East and Africa says: “Perhaps the most surprising development, however, is their increased focus on ESG and the challenge of integrating sustainability across the entire portfolio.” “While such developments are to be welcomed practical obstacles remain. Having access to high-quality data, for instance, is one area that can prove challenging and requires an industry-wide response.” This report indicated that this focus on ESG factors came against a backdrop of growing pressure from regulators – coupled with political momentum following the COP21 summit in Paris in 2015. Recent rules changes in the UK will compel pension trustees to take account of ESG factors as part of their investment process from October next year. While ESG’s importance is widely accepted, differing views over how to best integrate ESG considerations into investment processes remain. In fact, there is widespread agreement (90 per cent) that regulators should provide clarity in this area by defining ESG investments on a consistent basis globally. Elsewhere the survey found that despite difficult market conditions insurers are in a relatively upbeat mood and ready to increase their risk exposure across various asset allocations. The report said alternatives remain attractive to insurers, and there is continued high interest in private markets, along with a desire to selectively take advantage of emerging market opportunities, such as the China A market. Liedke adds: “Similar to 2017, insurers worldwide still see increased investment returns as a key means to boost profitability. What is different this year, however, is the marked change in insurers’ willingness to take risk. “This is certainly an important shift reflecting a significant easing of concern around macroeconomic and market risk, despite continued geopolitical tension and a less positive outlook.”
The majority of global insurers (80%) plan to incorporate ESG criteria into their investment process, according to a Global Insurance Report published by BlackRock. While 83% of the 327 industry executives surveyed indicated ESG factors are growing in significance, lack of internal expertise was cited as a challenge in integrating ESG factors. Even insurers with experience of ESG investment reported struggled to integrate ESG strategies at the fund level. Elevated focus on ESG factors was due shift in the regulatory and political climate. From this year, UK regulations require pension trustees to incorporate ESG factors into their investment process.