Survey: U.S. Insurers Rapidly Adding ESG Factors to Investment Practices
January 19, 2022
By Terence Martin, a Director in Insurance Research, and Matt Daly, Head of Corporate and Municipal Teams
U.S. insurance companies appear to be rapidly incorporating ESG (environmental, social and governance) factors into their investment strategies, according to a recent survey of U.S. insurance decision-makers commissioned by Conning.
Nearly 80% of survey respondents indicated that their firms began addressing ESG concerns within the last two years (see Figure 1), apparently heeding the global clarion call regarding ESG investment practices. While U.S. insurers have long considered ESG and climate-related risks in underwriting, previous global surveys have indicated that U.S. insurers, in general, have trailed counterparts in Europe and Asia in incorporating ESG factors into their investment practices. However, U.S. insurers may be closing the gap.
With ESG interest rising among industry regulators, it is no surprise that respondents point to regulators as a key influencer in their greater attention to ESG. But according to survey respondents the greatest influencer–slightly ahead of regulators–is the insurers’ corporate reputation.
A large majority of survey respondents also said that they agree with the importance of including ESG criteria in their firms’ investment processes, regardless of whether the investments are handled internally or externally. While admitting that adding ESG considerations may require additional resources, respondents said they believe the reward is worth the cost. However, they also noted concerns over the lack of standardization with respect to ESG metrics and, less significantly, potential ESG constraints on portfolios. Although ESG considerations have increased in performance they do not dominate investment concerns as respondents remain more concerned about more traditional issues including inflation, market volatility and monetary and fiscal policy.
The following is a look at some highlights of the survey, including some variances by life/annuity versus P&C insurer respondents and by company size.
Broad-based Interest in ESG
Interest in ESG seems broad-based, according to the survey respondents. Only 9% had not yet made ESG a part of their investment considerations, and two-thirds of them said they plan to consider it during the next 12 months. Life/annuity companies had a slight edge as early movers: 16% of life/annuity company respondents said they had adopted ESG two or more years ago, compared to 11% of P&C respondents.
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