10x6 : ISR
Socially-responsible investments (SRI) are about to crucially change the life insurance scenery. During the 10x6 Sogelife: Life Insurance Insights, Matt Moran, Deputy Advisory & Partner at PWC, and Claire de Boursetty, Legal Policy Advisor for ACA, addressed the matter.
What are the big trends in terms of RSE in Luxembourg?
Claire de Boursetty: I think for now insurance companies are finding their feet. They don’t know yet exactly how to go about the subject, but they are starting at least to be aware of it. Within ACA we are trying to push the subject because lots of regulations are coming. To give you an example of what we do, ACA became a supporting institution of the principles for sustainable insurance which is promoted by the United Nations Environment Programme Finance Initiative (UNEP FI).
Matt Moran: When I go and visit other countries on conferences, I see insurance companies being very focused on socially responsible investing in the whole area of climate change. The industry at large is engaged. In fact, it’s essential because it has such an impact on us human beings but also on the companies themselves. In the wealth management space in Luxembourg we are dealing typically with the subsidiaries and they have a less direct influence on socially responsible investing. Definitely the next generation of wealthy clients are just more conscious of it as a topic and hence I do think it will be more a part of the fabric here in the coming decade.
The interest for the SRI is growing, why are they so convincing for customers and companies?
Claire de Boursetty: It’s obvious that there is a problem and I think people are becoming aware of this problem and more conscious. A lot of the millennials will get a big transfer of assets from the baby boomers and they are more conscious. You’ve got also more women that are involved in the financial industry and as investors - they usually tend to be more sensitive to these issues.
Matt Moran: The world is in crisis and we need to change our habits. Unfortunately, at the moment it’s still a lot more words than actions. We have to change how we live quite dramatically to ensure that the social equilibrium going forward is enhanced. We are on a downward slope and we have to turn. That’s part of the reason why SRI is coming to the fore, we’ve seen the Norwegian sovereign wealth fund, the biggest in the world, deciding it will no longer invest in fossil fuels. That’s a huge statement. What we do see in Luxembourg and in the whole fund industry is that now SRI and ESG investing are becoming such a prominent theme.
What are the other advantages of these sustainable investments supports?
Matt Moran: I think lots of current companies will not be with us in a number of years unless they change their way of working, how they produce energy or how they use energy. It’s more about how to live and complement the natural resources than just use and abuse them. I can feel a greater consciousness than as of three or four years. I cover China for PwC and I have been to China maybe 15 or 16 times as of four years. It has a big pollution problem, it has grown its population into the middle classes which is positive but on the other hand it’s not a sustainable way of investment.
Claire de Boursetty: We’ve got a lot of studies that say that if you integrate sustainability within your investments in the long term, it has a positive impact. Of course, if you want to do short term profit, it’s a bit more complicated maybe. More generally, institutional clients but also private clients will benefit of more transparency on their assets in general. Because if you want to show that you are really investing their money sustainably, you need to prove it. So, there is work to do about how to get the data, how to bring this transparency to the end client. It will be a factor of the future in deciding where you invest.