2014

Sustainability rating of life insurance companies

The analysis of life insurance companies was first launched in 2014. We now rate 12 Swedish and 9 Danish pension funds.

Background

Pension funds are large asset owners with power and opportunity to influence companies in a sustainable way. The main purpose of the analysis is to give individual pension savers information and the tools to choose the most sustainable option from the existing life insurance companies covered in this analysis, hence the rating is relative and follow Söderberg & partners traffic-light system.

Method

The analysis is based on publicly available information and answers in our questionnaire with open-ended questions about life insurance companies’ work with responsible investment. The most important and material differences in sustainability practices among the investigated life insurance companies have been defined as “Engagement and Active Ownership”, “Processes for Sustainable Investments” as well as “Sustainability Ambitions and Value Creation”. Therefore, the life insurance companies are evaluated and rated within these perspectives, and the final rating is a weighting of the scores in each of the three perspectives.

Rating parameters

• Engagement and responsible ownership

  This perspective captures the effectiveness of the life insurance company’s engagement. The results of engagement is hard to measure because there are often several different actions that cause a company to change, for example, other actors’ engagement work, customer demands, laws and regulations etc. For this reason, we have chosen to evaluate the structures and processes the life insurance companies have in place in order to create good pre-conditions for engagement.
  
  

• Process for sustainable investments

  This perspective reflects how the life insurance companies work to take sustainability into account in their asset management. In other words, what tools, methods and incentives asset managers have to ensure that the holdings are more sustainable than the market. Important parameters within this perspective are access to sustainability analysis and information, how it is used, incentives and feedback to the managers as well as methods for integrating sustainability factors into the investment decisions. The perspective focuses on positive selection rather than exclusions.
  
  

• Sustainability Ambitions and Value Creation

  This perspective captures the extent to which the life insurance company contributes to development in the area of responsible investment. It is important to reward life insurance companies in this perspective, since sustainable investment strategies are a relatively new area. It is not obvious what best practices are and more knowledge and transparency is needed. Therefore, it is good that life insurance companies prioritize sustainability and, by taking own initiatives and cooperating with other actors, contribute to further development in the area.