For insurers, unprecedented risks require unprecedented solutions

The climate crisis, resource deficits and biodiversity loss are putting companies, industries, the financial sector and the entire global economy in a state of heightened risk. But the weight of concern doesn’t just sit with big institutions. According to Sindhu Krishna, Head of Sustainable Investing at Phoenix Group’s asset management unit, workers, households and retirees are also shouldering the burden – concerned with how it will impact the world as well as their financial future.

Krishna says those concerns are reflected in changing customer attitudes and product preferences towards more sustainability. And with nearly 12 million customers spread across the UK and continental Europe, Phoenix’s results can be seen as a good gauge of shifting societal preferences on climate change and the role of insurance and investing to address it.

“Climate’s visibility and scale is dominating, but there are other financially material risks that cannot be ignored if we are to improve customer outcomes. At Phoenix Group, we’re working hard to understand and integrate environmental, social, and governance factors into our investment portfolios, so that we can continue to help our customers to and through retirement.”

“Meeting those future obligations requires executing responsible investing strategies now,” Krishna says.

Based on its strong reputation as an innovator and thought leader in sustainable investing, Phoenix enlisted the support of Robeco for a deep dive into the latest SI analytics and to co-develop a sustainable, multi-asset solution to meet its long-term investment objectives.

The genesis of the mandate was rooted in addressing SDG 13 (Climate action). Krishna explains that while learning how to de-risk and decarbonize portfolios over the long term is critical, Phoenix also wants to capitalize on the solution providers that enable the transition to a sustainable economy.

“Trillions in capital flows need to be funneled to the SDGs by 2030; there’s money to be made connecting investors with the opportunities across water, education, poverty and nature. Robeco’s SDG framework helps convert these needs into an investable pipeline for investors who want to do good without compromising market returns.”

Robeco was able to draw from an extensive toolkit of investment methods and strategies to create a bespoke 60/40 portfolio that includes equity strategies focused on net-zero climate, sustainable property, smart energy, smart materials and smart mobility opportunities. The bond side will focus on global climate bonds, green bonds and SDG high yield bonds.

Krishna liked the rigor and clarity of Robeco’s SDG approach, which preceded even the EU’s own taxonomy for defining sustainable investment activities.

“There was a lot of emphasis on risk management which combined deep quantitative tools, fundamental experience, and systematic frameworks to measure alignment with SDGs related to the climate transition.”