Enhancement

Enhancement refers to the systematic integration of ESG criteria along the entire investment process, from Strategic Asset Allocation (SAA) to monitoring and reporting. Today, ESG aspects are considered for close to 100% of Swiss Re's SAA ¹. Based on the risk-adjusted return profiles tracked by Swiss Re, including ESG criteria into investment portfolios can make economic sense, especially over the long term.

Swiss Re strives to invest in issuers that are addressing sustainability-related challenges and opportunities by taking into account their exposure and ability to manage such risks. For its sovereign, supranational and agency bonds, Swiss Re has been applying a minimum ESG rating threshold, whenever available. Any possible exception from the minimum rating would be driven by Asset-liability management (ALM) considerations.

In 2017, ESG benchmarks ² were implemented for the actively managed listed equity and corporate bond mandates ³. Limited leeway for deviations is given, whereby such investments are required to have either a positive ESG trend or provide compensation for the underlying ESG risk. The implementation of these benchmarks allows Swiss Re to have both the right measurement and appropriate incentives for our investment managers in place. If benchmarks are not applicable, a minimum ESG rating threshold² is applied to the mandates, such as the buy-and-maintain corporate bond mandates.

The ESG ratings applied to companies reflect the investees’ exposure to and management of sector-specific key ESG risks, including the ones Swiss Re has identified as financially material. Swiss Re defines and contractually agrees these ESG rating requirements with its investment managers. Swiss Re considers the application of minimum ESG ratings an effective measure to limit exposure to companies with weaker sustainability and related financial performance. This is reflected in the ESG rating profile of Swiss Re’s corporate bond portfolio ⁴, as shown in the KPI tab.

For its real estate portfolio, Swiss Re evaluates new investments in properties from an environmental and social perspective, and strives to improve the sustainability characteristics of properties already in the portfolio,  as economically sensible. Connected to that, Swiss Re's US real estate investments are benchmarked against GRESB, an industry-driven organisation sharpening the way capital markets assess the ESG performance of real assets.

For Swiss Re’s Principal Investments, the majority of investee companies ⁵ is monitored with regard to their ESG related performance with a focus on environmental and governance aspects.

At the end of 2023, approximately 47% of the Swiss Re's investment portfolio was managed externally, and 98% of those assets were managed by signatories to the Principles for Responsible Investment (PRI).

Swiss Re works closely with its external investment managers to ensure they consider ESG, and specifically climate-related aspects, consistently in their investment processes. Swiss Re applies a dedicated due diligence framework for selecting and monitoring external investment managers for compliance with its responsible investing expectations. The framework is used to evaluate the investment managers’ ESG integration into their investment decisions and monitoring, as well as the investment managers’ commitment to responsible investing. This includes the assessment of the following elements: governance and policies, resources, philosophy and integration, stewardship, portfolio monitoring and reporting as well as memberships and disclosure. The framework was revised and strengthened in 2022, in line with the then latest market standards and taking into account best-in-class approaches.

Swiss Re recognises stewardship activities as an integral part of its commitment to responsible investing. To reflect this in the voting and engagement behaviour, Swiss Re's Asset Management has defined principles in the Asset Management Stewardship Policy and reports on them.

In case of internally managed portfolios, we make use of our influence as a responsible shareholder by directly exercising our voting rights and engaging with companies in which we are invested.

For externally managed portfolios, Asset Management works with the relevant investment managers to execute the proxy votes and engagement activities. It reviews the voting policies of external investment managers during the due diligence process to confirm compliance with the Swiss Re policy. In addition, external investment managers are required to report on stewardship activities conducted on Swiss Re's behalf.

In addition to shares in listed companies, investments in Swiss Re's listed equity portfolio include exchange-traded funds (ETFs). The selected fund managers cast votes on these ETFs in line with their own voting policies and processes.

Swiss Re considers engagement with the real economy as an integral part of its contribution to limiting global warming to 1.5°C. Its internally developed Engagement Framework has been designed to encourage investee companies to strengthen their business performance and achieve long-term sustainability-related goals. The framework also takes into account regulatory requirements such as the Shareholder Rights Directive 2017/828 (SRD II).

In 2023, the Engagement Framework was also introduced for corporate bond mandates, building on its application to the actively managed listed equity mandates since 2020. Engagement efforts were consistently carried out for the actively managed listed equity mandates until the divestment in the second quarter of 2023.

Swiss Re has been working closely with the external investment managers of both asset classes to execute the Framework across the mandates. Targets have been set for engagement frequency and desired outcomes. The investment managers are contractually required to report the level of progress achieved and highlights of their engagement activities to Swiss Re on a semi-annual basis.

The Engagement Framework comprises two topics, “Alignment of Business Model with 1.5°C Target” and “Enhancement of Transparency: Disclosure of ESG Key Metrics”, each covering three specific focus areas.

Putting emphasis on engaging on "Alignment of Business Model with 1.5°C Target" with companies that have a carbon intensity above the aspired level is one of the measures aimed at achieving the targeted emissions reduction. In 2023, 75% of the top 20 carbon emitting companies ¹ in Swiss Re's corporate bond mandates were engaged to this effect.

Having access to financially relevant ESG information is vital to perform a comprehensive assessment of potential underlying risks. Swiss Re encourages investee companies to progress on this matter through its second engagement topic “Enhancement of Transparency: Disclosure of ESG Key Metrics“. 

Refer to the KPI tab on this page or the Sustainability Report for further information.

The ESG ratings applied to companies reflect the investees’ exposure to and management of sector-specific key ESG risks.

2023 is the sixth year that the US real estate portfolio achieved four out of five stars in GRESB. Swiss Re was able to maintain the same score over the last three years, thus outperforming the GRESB average.

The voting rights of Swiss Re’s actively managed listed equity portfolio were exercised on its behalf before the portfolio was sold in the second quarter of 2023.

Swiss Re encourages investment managers to put emphasis on engagement topics "Alignment of Business Model with 1.5°C Target" and “Enhancement of Transparency: Disclosure of ESG Key Metrics“.