Coming out of COVID-19 and looking at the social issues the USA is facing, if investors, and especially insurers, still have to look for a reason to get behind the ESG impetus, then "shame on you", Alllianz Life chief investment officer Todd Hedtke says.
Hedtke will speak about ESG investing at Insurance Asset Risk Americas event in September. Ahead of his talk he told us that while there haven't been tangible changes so far this year, the momentum around sustainable investing has definitely increased.
"You can see that in the political discourse: on both sides of the aisle this is now a topic and this is the first time [that has happened]," he said. "On the investment side, it's the same. It's not like we see a lot of new projects coming through, but the energy around ESG investing has definitely increased."
Hedtke believes in the USA this is mostly being driven by social considerations on the back of the #MeToo and #BlackLivesMatter movements, but added that the environmental aspect is generally much more understood today than it was 12 months ago.
The challenges for USA insurers to support the transition to a low carbon economy depend on the nature of the insurer.
"For life insurers, like pension funds, you need to make sure that your investments are achieving the best possible return," Hedtke said. "And part of that is to demonstrate that ESG investments are going to outperform the traditional investments."
The development of climate models will be very important in that respect because they will help make the case for ESG investment, he said. But although insurers like Allianz Life can comfortably talk about their investment in a 10 year horizon, this is not true for every investor, and Hedtke believes that making a case for ESG investing in a quarterly or even 12-month horizon is a challenge.
Asked what his message to the Insurance Asset Risk Americas event audience will be, he said: "As investors who have big pools of capital who are not only going to put [that capital] to work we also have influence, and people will want to talk with us. Coming out of COVID-19 and the social issues we face in the USA, if you had to look for a reason to get behind these [ESG] efforts well then shame on you. As long-term investors it is not only the right thing to do from an investment standpoint, it is also kind of our obligation to be part of the solution and not be part of the problem."
Hedtke will speak on a panel with Michèle Lacroix, head of group investment risk & sustainability at Scor, who told Insurance Asset Risk the USA may bear a huge responsibility in the collective failure in tackling climate change.
Insurance Asset Risk Americas will be held as a virtual conference this year due to COVID-19. The conference will take place on 22 and 23 of September, more details can be found here.