Investment Managers (Irish Life) is to convert its entire book of assets under discretionary control to a responsible investing approach. By end of December, the company will have over EUR15 billion in assets under management which explicitly consider environmental, social and governance (ESG) factors in their investment approaches.
A growing focus in investment markets relates to the area of Responsible Investment or the consideration of ESG factors within investment decision making. From an investment perspective, there is a growing importance of ESG factors in terms of delivering sustainable longer term returns particularly around key macro themes such as climate change which will impact on all assets into the future.
The move by Irish Life to employ a responsible investment strategy across all discretionary managed investments will initially benefit Irish Life’s flagship fund MAPS, with legacy managed funds converting over the next 18-24 months. In addition, Irish Life will also be providing a range of options for clients who wish move to responsible investment strategies.
Speaking at Climate Finance Week ESG Day, Patrick Burke, Managing Director, Irish Life Investment Managers, said: “Our clients trust us with their investments and to deliver on our core promise to them – to deliver better futures. The sustainability of these investments, particularly with respect to climate change, is a key issue which needs to be considered by all investment managers. Irish Life is leading the way, starting back in 2010 when we were one of the first Irish signatories to the UN-supported Principles of Responsible Investment*. Since then we have been actively using our shareholding responsibly, advocating and encouraging better standards from the companies in which we invest.
“Today’s announcement is a major milestone in this journey as we commit to moving all of our assets under discretionary control to being responsibly invested. In real terms, this means that before the end of this year, we will have over €15bn in assets under management invested with consideration of ESG criteria. Our approach is to materially improve the sustainability characteristics of our investment strategies while maintaining the same risk/return profiles. We have underpinned that approach with rigorous analysis, including with over 2 years of proprietary research.”
The main investment approaches to ESG are:
Exclusion where investors exclude companies from portfolios where their conduct breaches well established globally accepted standards or where their business model centres around activities which investors feel are not consistent with a sustainable economy in the future.
Integration where investors explicitly include ESG factors into investment decision making, considering them alongside other traditional factors from a risk management perspective.
Active Ownership where investors use shareholding power to influence corporate behaviour to more sustainable business practices through voting and direct engagement and dialogue.
Irish Life’s investment strategies have included the exclusion of a limited number of individual companies from the benchmark universe and adopting an investment approach which considers the ESG practices of companies alongside other traditional criteria in terms of making investment decisions. Within its active ownership approach, the company is working with partners to encourage and influence changes in the companies in which they invest on key and financially material ESG themes on areas such as climate change and strong corporate governance.
Burke says: “We operate a holistic three-pillar approach which covers exclusion, integration and active ownership all of which consider climate change as a key factor. Our customers will see this commitment as we are in the process of achieving a 30% reduction in the carbon intensity of portfolios. We have also recently signed up to Climate Action 100+ a global investor initiative targeting the world’s largest corporate greenhouse emitters to take meaningful action on climate change. Ireland like any other economy needs to transform to a more sustainable way of operating – Irish Life’s position gives us the responsibility to drive this change in our sector.”
