Insurance organizations fall into the asset owners category, which Chris Fowler, director of signatory relations for the Americas at the PRI, described as “the top of the investment food chain,” with the ability to influence investment decisions and processes.
“Insurance general accounts are very important for PRI, both in terms of the amount of assets they have, and the potential influence they can have over their own direct investment decisions, as well as their third-party investment managers,” Fowler told Insurance Business. “Both of these asset owners in the insurance context – the general accounts and their direct affiliates or third-party investment managers – are part of an insurance sector ecosystem that we see as very important, and one that is really waking up now to ESG and the principals for responsible investment.”
The first principle of PRI is that signatories commit to incorporating ESG issues into all investment analysis and decision-making processes. They also commit to being active owners and to engaging in related policies and practices. The third principle revolves around data collection – signatories will seek appropriate disclosure on ESG issues by the entities in which they invest. Meanwhile, the fourth and fifth principles are around collaborating with other investors to improve practice, and also to promote the principles in the marketplace. And by following the sixth principle, signatories will report back to PRI on their activities and progress towards implementing the six principles.
How can insurers get started on this ESG investment journey?
“It’s complicated, especially if you’re in a government affairs role, a compliance role, or a legal role at a major insurance company on the general account side, and all of a sudden, you’re tasked with figuring out ESG,” said Fowler. “You wade into this space, you learn what ESG means, and then you’re rapidly confronted with lots of different challenges in terms of the steepness of the learning curve, the breadth of issues, and just the acronyms associated with the very many organizations and initiatives that you need to learn.
“I advise people to take a step back and get comfortable with the idea that what we’re talking about is fundamentally a better approach to investment because you’re thinking about material risks and opportunities that can have an impact on investment decisions, regardless of asset class. There are various misperceptions that one has to overcome in terms of responsible investment, so just getting that basic understanding is really helpful. We’re talking about a better investment process.”
Insurance organizations at the start of their ESG investment journey don’t need to recreate the wheel, Fowler stressed. There are simple steps that they can take, and there’s a lot that they can learn from other companies – for example, many of the PRI’s signatories – around internal and external decision-making processes, and implementing ESG initiatives.
“Frankly, becoming a PRI signatory is a very practical way to get started because it gives you a framework as a conversation starter internally,” Fowler commented. “You can use that framework to approach a committee or the board to say: ‘These are the six principles and the areas that we’ll need to be focused on as we prepare our business to report to the PRI in the next year or two.”
The entry point to ESG for many organizations, particularly insurers, is climate change. In recent years, the global insurance industry has had to reckon with increased frequency and severity of severe weather events. Insurers are looking to build and support more climate-resilient communities, and as such, there’s a lot of interest in furthering investments in this area.
“Just looking at climate change in isolation is challenging,” said Fowler, “because it’s so interconnected with so many other issues. Take social issues, for example, if an insurer is being challenged over their coal investments (which many are these days), what are the implications of a dislocated workforce in the coal sector. That’s a social issue which is inextricably linked to climate. In terms of governance, look at board structure and all the pressure Exxon has been facing about having climate experts sitting on its board, and the climate-related changes they’re committed to making.
“Climate change is holistic in that it impacts a range of ESG issues, and once companies see that, they can start to climb that learning curve and embrace more sustainable finance principles.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
