Tuesday 20 July 2021 11:41 am

Zurich UK switches $1bn into new ESG benchmark to cut its carbon emissions

Zurich UK has switched almost $1bn (£73m) of its investment portfolio into a new ESG benchmark in a bid to reduce its carbon emissions.

The insurance giant said, in an announcement today, the new benchmark will deliver a 30 per cent reduction in emissions as well as “enhanced” ESG outcomes, compared to its parent index.

The insurer intends to switch almost $1bn of its passive US equity mandates into a fund managed by investment manager DWS which tracks the new index and applies a further screen excluding companies that do not meet Zurich’s ESG policy.

The index was developed by Morgan Stanley Capital International (MSCI), an investment research firm which gives ESG scores to over 600 companies.  MSCI will manage, calculate and distribute the index, Zurich said in a statement.

The Index includes companies based on MSCI’s ESG metrics. The scores are combined with a company’s market capitalisation, allocating a higher index weighting to those companies with a good and improving ESG profile. 

Unlike some ESG indices, the Index is ‘sector neutral’ meaning that high carbon emitting industries have the same overall weighting in the Index, but different allocations are made at the individual company level. 

Zurich UK’s chief investment officer David Thompson said the move to reduce financed carbon emissions from Zurich’s portfolio will allow the insurer to help finance “a more sustainable future”.

Zurich manages £25 billion of pension and life insurance assets on behalf of its customers, invested across equities, bonds and property.

“Weighting our investments towards companies that score highly on ESG principles,” Thompson said in a statement, “can deliver both superior risk-adjusted returns for customers and more sustainable outcomes.”

Zurich confirmed that investment management charges for customers investing in the fund would not change.