New Conning Survey Shows a Significant Jump in ESG Investing Engagement Among U.S. Insurers

January 19, 2022


Four Out of Five Respondents Indicate that their Firms Initiated ESG Analyses in Past Two Years;

Corporate Reputation is a Top Motivator

 


  • 41% of survey respondents indicated that their firms began to include ESG in their investment considerations in 2021
  • 92% of respondents cite corporate reputation as the #1 reason for adopting an ESG investment focus, followed closely by customer and employee concerns, regulatory requirements, leadership concerns about social issues, and the potential for competitive advantage
  • Lack of ESG reporting standards outweighs concern about ESG constraints on investment performance
  • Apart from ESG considerations, leading portfolio concerns of respondents include inflation, market volatility, risk-based capital factor changes, as well as monetary and fiscal policy
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    HARTFORD, CT – January 19, 2022 –The interest of U.S. insurance companies in incorporating Environmental, Social and Governance ("ESG”) factors into their investment strategies grew significantly in the past two years, according to a new survey by leading global insurance asset management firm Conning, which polled decision-makers at U.S. life and P&C insurers. A Conning Viewpoint summarizing the results is available on the Conning website.

     

    While U.S. insurers have long considered ESG and climate-related risks in underwriting, many U.S. insurers have only recently started to evaluate their investments using ESG criteria. The survey suggests their engagement with ESG investing factors may be accelerating – 41% of respondents indicate that they began incorporating ESG factors this past year, 79% the past two years, and only 12% more than two years ago. A total of 67% reported incorporating ESG factors into their investment considerations in 2021.

     

     

    Despite their extensive experience managing risk, particularly in the area of climate risk, U.S. insurers have been slow relative to their counterparts in Europe and Asia in prioritizing and implementing ESG investment guidelines. Concerns about return on ESG investment (particularly among life insurance respondents), disparate and unaligned ESG reporting standards, and a challenging market environment have likely slowed the commitment of U.S. insurers to incorporate ESG factors into their investment guidelines. The drivers were similar across firms of different sizes, but larger firms appear to have adopted ESG criteria somewhat sooner than smaller firms.

     

     

    The leading driver influencing insurers’ commitment to incorporating ESG factors into their investment strategy is the potential impact on their corporate reputation.  Accordingly, 92% of respondents indicated that corporate reputation is either “important” or “very important” as a driver to incorporate ESG investment factors.  In terms of other drivers, corporate reputation was followed closely by customer and employee concerns, regulatory requirements, leadership concerns about social issues, and the potential for competitive advantage. 

     

     

    “ESG has been and will continue to be central in conversations with clients about investment strategies moving forward, especially given an increasing regulatory and social focus on a range of issues including global environmental risks, social justice, diversity, and proper governance” said Woody Bradford, CEO and Chair of the Board, Conning. “Those who don’t keep up or ensure thorough implementation will be left behind as ESG grows in importance to all stakeholders,” he noted.

     

     

    Survey respondents indicated that the lack of ESG reporting standards outweighs their firms’ concern about the constraints ESG may impose on investments. The lack of standardized ESG reporting continues to be a concern for U.S. insurers and, until uniform guidelines are put in place, U.S. insurers will need to manage the challenges of assessing ESG investment data based on different sets of criteria. 

     

     

    Insurers polled indicated the following pros and cons where ESG investments and constraints are concerned:


    • 80% agreed ESG is an important aspect of assessing investments
    • 68% agreed with the statement that there is a short-term risk to investing with ESG, but it is worth that risk
    • 64% said ESG imposes a significant constraint on investment decision-making (although the survey respondents suggest their firms are more concerned with other aspects of ESG than with the investment constraints).

     

    The survey asked respondents to identify and compare ESG priorities against other concerns and the results indicated that insurers are primarily concerned about inflation, market volatility, risk-based capital factor changes, as well as the impact of monetary and fiscal policy. As expected, the concerns vary by insurance type. For example, low investment yields was the third highest concern for life companies and ranked 12th (last) for P&C firms. Monetary policy was a higher concern for P&C (ranked 4th vs. 8th for Life companies).

     

     

    “Despite the many considerations, resources, and challenges involved with implementing ESG-focused investing, insurers seem to understand that, ultimately, the benefits outweigh the costs,” said Matt Daly, Head of Corporate and Municipal Teams at Conning. “Given the responses we saw in this survey, ESG is likely to become an even more central part of insurance asset management in the near future.”

     

     

    Outside of incorporating ESG factors into their investment strategies, respondents indicated that their firms already incorporate the following ESG-related considerations into their operations:


    • A sustainability report – 46%
    • A social investment policy – 44%
    • A Diversity Equity & Inclusion (DEI) council – 41%
    • A governance investment policy – 41%
    • A diversity officer – 40%

     

    These highlight ESG principles in internal and external communications, reinforcing the importance of ESG factors on the firms’ reputation. “As ESG engagement increases among U.S. insurance companies, as well as increasing U.S. regulatory demands, more firms are likely to integrate ESG principles and programs across investments and operations in the years to come,” said Terence Martin, Director, Insurance Research at Conning and lead analyst for the survey.

     

     

    Methodology

     

    The Conning ESG Survey of U.S. Insurers utilized survey technology provided by Qualtrics, LLC in November 2021. The survey was sent to more than 7,000 insurance industry representatives, resulting in 280 qualified responses from U.S. insurance decision-makers in the life and P&C sectors. Results may not be representative of any one respondent’s experience as they reflect an average of all, or a sample of all, of the experiences of surveyed U.S. insurance company decision-makers. Conning paid Qualtrics, LLC a fee for services rendered. Analysis of results was done by Conning’s Insurance Research team with additional analysis by the firm’s investment team.


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    ABOUT CONNING

    Conning (www.conning.comis a leading investment management firm with approximately $215 billion in global assets under management as of December 31, 2021.* With a long history of serving the insurance industry, Conning supports institutional investors, including insurers and pension plans, with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America. 


    *As of December 31, 2021, represents the combined global assets under management for the affiliated firms under Conning Holdings Limited and Cathay Securities Investment Trust Co., Ltd. (“SITE”).  SITE reports internally into Conning Asia Pacific Limited, but is a separate legal entity under Cathay Financial Holding Co., Ltd. which is the ultimate controlling parent of all Conning Holdings Limited controlled entities. 

     

     

    ABOUT CONNING INSURANCE RESEARCH

    Insurance Research at Conning has been working with insurers for more than 50 years, offering an array of insurance industry research and consulting services. Its team of analysts has a wealth of experience in all segments of the insurance industry. Conning's insurance industry clients benefit from that deep insurance industry knowledge; from ongoing surveys of key industry executives; from proprietary Conning data, forecasts and models; and from in-depth analyses of insurance industry performance data.

     

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    Media Contacts

    Myra Lee
    Conning
    +1 860 299 2278
    myra.lee@conning.com

     

    Katrin Lieberwirth
    Stanton
    +1 646 502 3548
    klieberwirth@stantonprm.com