Strategy with a long-term focus
Our investment strategy has a long-term focus, which is the nature of the insurance business. Due to the long-term obligations arising from life insurance contracts or occupational pension contracts, short-term profit maximisation is not the main focus.
The ultimate goal of our investment strategy is to obtain a result which is as great and sustainable as possible. Within this goal, we integrate the principles of responsible investment into our investment process. We are confident that this will have a long-term positive effect on the risk/return profile by reducing reputational risks, potential legal risks and the accompanying negative financial results.
Since early 2019, Baloise Asset Management has been investing new funds for all insurance assets and thus for the collective foundation on the basis of the newly defined responsible investment policy. The scope of our responsible investment policy relates to investments in shares and bonds, including loans.
Baloise Asset Management also includes the Real Estate division. Baloise is one of the largest property owners in Switzerland. For us as a responsible investor, sustainable real estate investments and long-term returns are closely linked. For the benefit of our policyholders and investors, we use responsible property management to secure our earning power on a sustainable basis and improve the value of our properties.
Real estate consumes about 40% of the available primary energy and produces about 1/3 of CO2 emissions.¹ In order to optimize the energy efficiency of our building stock, we strive to reduce energy consumption primarily through the renovation of older buildings and replacement buildings, in addition to the acquisition of properties, portfolios and new construction projects. Our tenants benefit from lower operating costs. This can help to retain existing tenants and, on the other hand, to attract new tenants.
Our investment decisions combine financial goals, ecology and social challenges. We are convinced that demographic change (ageing of the population and reduction of household sizes) and new technologies (digitalisation) will lead to changing tenant needs and corresponding demand in the market. Through forward planning, we continuously review these needs in our investment decisions (e.g. small apartments) and maintain tenant satisfaction.
In the case of new construction projects, we strive for certification - in the case of renovations, this is checked on a situational basis. For this purpose, the consumption figures (energy and water consumption) of the properties are systematically recorded and evaluated. With the help of the cantonal building energy certificate (GEAK), the energy efficiency of each property is determined and concrete measures for improvement are derived.
We apply our responsible investment policy
Our responsible investment (RI) policy consists of three strategic pillars:
1. ESG integration
We believe that the integration of ESG factors makes economic sense and will have a long-term positive effect on the risk/return profile. Within the framework of our RI policy, new investments in securities with an ESG rating lower than B (according to MSCI data) are not part of the investment universe.
If passive infringements occur, for example due to rating downgrades, these are assessed by the Responsible Investment Committee (RIC) once a quarter, and measures are applied where required.
We wish to avoid reputational and long-term default risks. We also understand that certain investments are not compatible with a responsible investment policy and therefore require special assessment.
As a result, Baloise Asset Management has been using exclusion criteria when it comes to manufacturers of controversial weapons for years. In particular, we follow the recommendations of the Swiss Association for Responsible Investments (SVVK – ASIR) and have fully adopted the published exclusion list. This currently relates to companies from the defence sector operating in the field of cluster munitions, anti-personnel mines or nuclear weapons.
In addition, no investments are made in companies that generate more than 30 per cent of their revenue from coal. This forms part of our endeavours which we are implementing within the scope of achieving Sustainable Development Goal No. 13 (combating climate change).
Distribution of ESG ratings (MSCI) for our investments based on available ESG ratings
(date of information base: 30 June 2019)
3. Exercise of voting rights
We take our responsibility as a shareholder seriously and exercise our statutory voting rights for Swiss stocks. We follow the principles of good and ethical corporate governance.
With particular emphasis on the climate
Climate change and the resulting effects, such as an increased likelihood of natural disasters along with the damage these cause, are key to our long-term investments. It is in our interest to keep environmental risks as low as possible while also achieving a positive impact on the environment in order to sustain it for us all in the long term. Our efforts in this area are embedded in Sustainable Development Goal (SDG) No. 13 (measures for climate protection).
In order to increase the transparency of our efforts in relation to SDG 13, we measure the CO2 intensity of our portfolio against the benchmark every year. Shown are the comparisons between the effective and benchmark portfolios for Swiss equities, European equities and our bond portfolio (Swiss equities: Swiss Market Index; EUR equities: Euro Stoxx 50; bonds: Barclays Global Aggregates). Our portfolios have a significantly lower CO2 intensity (as at 31.12.2019).