Scooping the award for investment innovation of 2020 is Aegon Asset Management with its Global Sustainable Sovereign Bond strategy, centred around the ubiquitous theme of sustainability.

While environmental, social and governance (ESG) factors have become increasingly embedded into equity and credit investment decision-making by insurers, it is still considered challenging to apply ESG criteria to sovereign bonds.

In 2020, after three years in the making, Aegon Asset Management launched its Global Sustainable Sovereign Bond strategy.

Its focus is on understanding the sustainability characteristics of individual sovereign bonds and complementing this with the liability-matching needs of insurance clients.

The company drew on a proprietary sovereign database covering 193 countries which captures 110 separate sustainability indicators per sovereign issuer, to accommodate sustainability considerations for individual insurers.

The strategy invests in financially strong countries that contribute to the improvements in sustainability targets, as defined by the UN's Sustainable Development Goals. The investment universe is global investment-grade government bonds, with a focus on developed markets. The bonds are all hard currency, and investments are hedged to the base currency of the investor, mitigating the cost of capital for insurers.

The methodology is unique insofar as it reflects the specific challenges at a country- and regional level, while keeping aligned with UN standards.

Judges were impressed by the product's harmonisation of needs for yield and ESG. It showed "a sophisticated approach to ESG on sovereign bonds," noted one judge. "There is a clear link to insurance clients' needs for both ESG and yield."