US insurers' interest in ESG grows significantly

Written by Adam Cadle

20/01/2022

The interest of US insurance companies in incorporating ESG factors into their investment strategies grew significantly in the past two years, according to a new survey by Conning.

The survey, sent to more than 7,000 insurance industry representatives, resulting in 280 qualified responses from US insurance decision-makers in the life and P&C sectors, revealed that 41% of respondents began incorporating ESG factors this past year, 79% the past two years, and only 12% more than two years ago.

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.

Survey respondents indicated that the lack of ESG reporting standards outweighs their firms’ concern about the constraints ESG may impose on investments.

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).

“Despite the many considerations, resources, and challenges involved with implementing ESG-focused investing, insurers seem to understand that, ultimately, the benefits outweigh the costs,” Matt Daly, head of corporate and municipal teams at Conning, said. “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%

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