Michèle Lacroix, head of group investment risk and sustainability at Scor, gave a keynote presentation at Insurance Asset Risk 2020 EMEA conference, being held virtually this year.
She likened the steps insurers take on integrating environmental, social and governance considerations in their investments to a journey from being a traditional investor to an investor with impact.
Traditional investors focus primarily on financial risks such as FX risk, interest rate risk and market risk. The sole objective of a traditional investor is to generate returns on financial capital.
In the second stage of the journey, the concept of resilience emerges and investors onboard non-financial risk in their investment decisions. “That is to say that you start to consider the outside-in effect of non-financial risks on the potential return of your investments,” she explained.
Moving forward, investors can start thinking of the impact of their activities to society and environment (i.e. the inside-out effect), whereby they try to ‘do no significant harm’ when investing.
“Being a little more active in your sustainability journey, you start to onboard thematic investments,” Lacroix said. “At this point, you try to answer the question ‘What should we select within the current economy that is sustainable in the long run?’. You have found a purpose [as to why you want to be a] sustainable investor, and you select themes you would like to foster in the coming years.”
The last part of the journey is to be impactful, she continued. “At that point in time it may be that you might have to trade off in the financial return of your investment, to better return on natural and social capital.”
Lacroix’s keynote speech is available on demande on the event’s website.